Who’s Up for Sustainable Living?

In his October 21, 2009 keynote address, “The Coming Famine: the risks to global food security”(presentation and speaking notes) at the Productivity and Food Security Symposium in Sydney, Australia, author Julian Cribb suggested that unabated consumption combined with unpredictable climate change inevitably leads to destabilization of environmental, economic and social systems. In turn, the capability of the global food system to feed people will be compromised. He expands upon this thesis in his new book, The Coming Famine: The Global Food Crisis and What We Can Do to Avoid It. For a quick analysis, consider Mark Bittman’s review, “Seeing a Time (Soon) When We’ll All Be Dieting”, in The New York Times.

Perhaps the time is nigh to advance sustainable local food systems as suggested in the posting, “Which Food System Do You Use to Get Your Calories?”. Hence the question, who’s up for sustainable living?

Originally posted to Sustainable Local Economic Development on Tumblr by Steve Bosserman on Wednesday, August 25, 2010

Don’t Mix Apples and Oranges When Designing a Local Food System

On Monday, 24 November 2008, I attended a Poultry Processing Working Group meeting convened by Megan Schoenfelt at the Ohio Agricultural Research and Development Center (OARDC) in Wooster, OH with a video link to the main campus for The Ohio State University in Columbus, OH. Over 20 interested individuals and key representatives from various agencies, institutions, and businesses gave thoughtful consideration to the feasibility of designing, developing, manufacturing, operating, and maintaining mobile poultry processing units, e.g., slaughterhouse or abattoir, in support of small to medium sized poultry production enterprises throughout Ohio. At the conclusion, commitments were made by several to develop plans further, put them into action, and move the concept forward. Megan’s minutes will provide you with an excellent overview of the session.

Although the meeting achieved its objectives and assured progress to goals, one topic that surfaced frequently during the session concerned the design criteria for local food systems versus those for a global food system. The difficulty arises when elements of a global food system are mixed into the specification for a local / regional food system. The two systems have unique organizing principles. The business model / value proposition for one is fundamentally different than the other. For this reason, comparing the two haphazardly or indiscriminately blending elements from both into a hybrid is the equivalent of mixing apples and oranges — doing so puts subsequent plans at risk for unsuccessful implementation.

So what are the main characteristics of a global food system versus a local food system?

Characteristics of a Global Food System

Below is a diagram that illustrates the flow of food from production to consumption in a global food system. Key points include the following:

Producers have a narrow portfolio often consisting of a near monoculture of crops, e.g., corn and soybeans, animals for meat, e.g., cattle and hogs, or dairy and poultry. Their objective is to produce as much as possible of one item for the least unit cost.
Aggregators and distributors span significant geographic distances in support of the overall system as it relentlessly pursues lowest cost labor, easiest access to natural resources, and highest performance of technology wherever that may be in the world. Their objective is to optimize transportation payloads from one value-add stage to another.
Value-add processors and packagers make major investments in capital equipment and facilities to increase capacity and automate operations. Their objective is to appropriate technological innovation that facilitates economies of scale in their operations, amortizes investments across high volume runs, provides consumers with an array of choices within discrete product groups and reduces dependency on human labor.

To quickly summarize, global food systems prompt producers to focus on growing / raising a limited portfolio, logistics and distribution become big ticket items due to the global reach of the system, and value-add processors centralize their operations to command as much margin as possible.

Characteristics of a Local Food System

The diagram below depicts the flow of food from production to consumption in a local food system. The main elements include the following:

Producers have a diverse portfolio of crops grown and animals raised. Many of the entries in such a portfolio are indigenous, have mixed use applications, and are interspersed / intercropped. The objective is to optimize the portfolio to include as wide a selection of offerings as possible and effectively leverage assets. This combination provides a hedge to protect revenue and cap costs despite unexpected swings in supply and demand for particular products or failures due to unexpected conditions.
Food processing, preparation, and retail occur within a contained geographic space – 1-100 mile radius – so that as food is produced it travels a short distance for just-in-time delivery to the next step in the value chain. The objective is to place the sale of fresh food in close proximity to food preparation and processing so that quality, taste, freshness, ripeness, and appearance are maximized and waste and spoilage are minimized. What doesn’t get sold as retail or is used in preparation moves immediately to value-add processing. This type of highly-integrated stacking of functions assures the highest return on investment of time and resources.
The dynamics of a local / regional market create a situation where the community or cluster of communities participating in the local / regional food system impart a “brand” on the food produced, processed, prepared, and sold within it while consumers enjoy a wide variety of locally-produced foodstuffs. The objective is to draw upon the virtues of economies of scope, leverage brand recognition within the community, and establish sufficient market participation due to ample selection to drive the emergence of a local economy. And as widespread participation persists, the local economy is sustained and the community is stabilized.

As a recap, local food systems encourage participants to diversify their portfolios, leverage investments, take advantage of integrated food processing, preparation, and retail operations within a 10 – 100 mile radius, and utilize economies of scope to lay the groundwork for local economies to be established.

Beware Mixing Global and Local Food Systems

As is obvious by their definitions, the differences in organizing principles and business models between global and local food systems are significant. While both certainly can and must co-exist within the total food system, an indiscriminate mix of one with the other almost always disadvantages the local food system. In many instances it will prevent such a system from forming or becoming sustainable.

So, what about that mobile poultry processing unit? How would a local food system work with poultry?

Diversify the production portfolio by including as many different kinds of domesticated birds, waterfowl, game birds, and exotic / specialty species as possible distributed across a wide range of small-scale producers.
Keep the processing unit in close proximity to clusters of food retail, preparation, and value-add processing facilities to assure quality, timeliness, variety, and price advantages in local markets.
Develop a strong brand identity in the local / regional market for the complete package of locally produced, processed, and prepared poultry products which obviously includes the mobile poultry processing unit.

Of course, attempting to operate as a global food system would be fraught with danger. Three actions to avoid:

Limit producers’ portfolios to one of two kinds of birds. Worse yet, consolidate the number of producers into one or two large-scale producers.
Distance the mobile poultry processing unit from the producers or those in downstream food preparation and value-add processing.
Target consumer markets that are far afield from the point of production and processing so that local branding is difficult. Worse yet is to limit the range of product offerings so severely that sustainability is at risk due to lack of market exposure and penetration.

While this example of sorting through local and global food systems characteristics concerns poultry operations, it applies to all other food products. Perhaps you will find this checklist a useful guide when developing such food systems.

Originally posted to Local Food Systems by Steve Bosserman on Saturday, November 29, 2008 09:59

Thoughts about Value-Add

Value-add dominates our economic scorecard. It is relatively easy to calculate in a manufacturing setting where value is added through material transformation at each step as a product moves from raw material to finished goods. Customers monetize this value by the purchase of products they anticipate will add value to their processes. Value-add also pertains to certain services, like financial and legal, that require a certified, licensed, or bonded provider that possesses or delivers specialized skills or knowledge. The consequence for not utilizing these services is the customer assumes risk.

The concept of value-add also plays a role in information technology and data services. Here, though, the meaning is vague. What value can be assigned to having data or to having data in a usable format? This instance of value is intangible and determined by the receiver of the message. Nowhere is intangible nature of value-add more evident that in marketing strategies and advertising campaigns. Information that induces a user to pay for a product or service has value only to the producer. Value-add for the customer or client occurs at the next step — the point of utilization.

So much for the traditional view of value-add. Here is where the current issues of globalization – localization come into play. A robust business strategy can entertain and exercise both sides!

On the globalization side, value-added products are produced and services provided far from their points of utilization and consumption. Success is driven by appropriate economies of scale. This situation will continue for many years to come as customers and clients exploit lower cost alternatives. On the localization side, value-added products and services are produced in close proximity to their points of utilization. Success here is driven by economies of scope. This situation enables products and services to be integrated into specific applications or solutions that are tailored for highly localized contexts.

How, though, does one put a value-add strategy in place? Re-enter data and information. Essentially, a successful strategy is a contextually relevant plan of action, conceived through the knowledgeable (and hopefully, wise!) interpretation of data and information, and executed by a skillful tactician. No matter how similar or unalike the challenges, relevant data and information are the common denominator.

Assuming everyone has access to the same data and information, there is no value-add. With universal access to the same data and information, there is a significant benefit. The rates increase in the discovery of new knowledge, application of knowledge already learned, and transfer of experience with applied knowledge from one place to another. In other words, accessibility to data and information makes the global human system of knowledge generation and utilization more effective, efficient, and expansive.

Since data and information carry no particular value unless one does not have access to them, they form a unique type of “commons“. Anyone may contribute to the pool of data and information, all benefit, and the quality of what is available is not diminished or compromised by the number of users. In fact, the quality and variety increases with more participants as evidenced by Wikipedia.

This “commons” approach is a cornerstone in “open source” philosophy wherein volunteers contribute entries and edits and the content is free to use. Originating in the realm of software development and usage, open source applies to any instance where people collaborate in the development, sustainability, and scalability of a system whereby end-users freely pull what they need from the system and respond to their unique circumstances. Participants increase the working knowledge about the system as they act locally and provide feedback to designers / developers so they improve the system’s robustness, range, and ease of use.

A comprehensive business strategy judiciously positions an “open source” / “free knowledge” dimension on the globalization and localization continuum. What to share in open forums, what to hold as proprietary and reserve for limited audiences, how much to contribute in the development and sustenance of open source endeavors, how much to invest in products, services, and technologies for satisfactory returns, where to standardize products, services, and technologies for economies of scale, where to proliferate economies of scope solutions within localized contexts – these are the kinds of questions about openness, standardization, and uniqueness that drive effective business strategies for all organization types.

Technology gets smaller, faster, stronger, more embedded, more integrated, and more intelligent. Localization increases. The value-add equation is redefined and a greater significance is placed on unique solutions. Addressing the above questions helps organizations adapt within their ever-changing operational landscapes. The implication being that organizations network and collaborate more broadly to energize, inspire, and focus their subject matter experts where it counts most – learning what customers and clients need in their business and social contexts and responding with value-added alternatives. Isn’t that “business as usual”?

Originally posted to New Media Explorer by Steve Bosserman on Thursday, July 12, 2007

A Broader Framework in Which Localization Occurs

One of the drivers behind technology development is the quest for human equivalence – the point where technology performs at a level of functioning that is equal to or greater than the functioning of the human brain. While it is speculative at best to estimate if and when such a goal is achieved, recent history illustrates that the increase in capability and capacity of technology is ramping up a rather steep slope. And if we are to trust the application of Moore’s law, technology’s prowess is doubling every 18-24 months. At that rate, it doesn’t take much to project a future wherein technology is closing in on human equivalence.

As a trend develops it is useful to be able to track its progress and anticipate its trajectory. Choosing or crafting a set of markers that give indication of a trend’s speed, depth, and scope as it gains influence and becomes an impetus for change is critical. While there are many markers from which to choose, the most durable and universally applicable sets concerns value added, particularly, where and how value is added.

The simple Wikipedia example about making miso soup from the above link is a good one to illustrate how advances in technology change the value-added equation. First, the value of the soup as the end product is comprised of the value added by the farmer to grow the raw product, soy beans, plus the value added by the processor to the soy beans to produce tofu, plus the value added by the chef to the tofu to prepare the soup. This “value package” utilizes a combination of equipment, input, labor, and know-how applied in various locations, stages, and timeframes—and is based on a specific capability and capacity level of technology.

What happens when technology develops further? There are several possibilities: the soy beans are grown in close proximity to the preparer; the yield of soy bean plants and desired quality and characteristics of the beans are increased; the equipment that harvests soy beans conducts post-harvest operations that condition the beans for making tofu; this equipment is smaller and more compact which accommodates localized production; methods of packaging, storing, and shipping soy beans or tofu are more integrated thereby consuming less energy and taking less time. In these instances, advances in technology are applied to the value-added equation dramatically altering the value package. The result is a system utilizing less costly and more productive equipment, requiring fewer inputs and less labor, and deeply embedding human knowledge and experience into new processes and tools. This has the potential to be transformational—and in relatively short order, too!

While the example of soy may represent a somewhat narrow space within which profound change can be noted, it does highlight where and how value added steps are enabled by technology. These changes can be witnessed in a broader sense through the lens of large social and economic “eras.” The first of these, industrialization , brought developments in technology to bear on centralizing facilities, equipment, and people in the production process where capital investments could be amortized through economies of scale.

As production technologies become scalable, logistics are more integrated and efficient, and information and communication technologies are more pervasive, powerful, and responsive, manufacturing operations are dispersed close to those areas where lower cost skilled or tractable labor is available. This is the impetus for “globalization.” Attendant to the distribution of manufacturing capability is the transfer of technology and subject matter expertise. This significantly increases the technological competence of the lower cost workforce. In this regard, globalization heightens the ability of people to utilize new technologies when presented and results in a more evenly distributed capability worldwide.

This puts us on the brink of the next era: localization. The embedded link goes to one of my earlier postings about this phenomenon, so I will not wax on about it again here. However, one quick observation: localization is the inevitable outcome of technology continuing to cost less, get stronger, fit into smaller spaces, run faster, be embedded in more operations, streamline processes, and sense, respond, adapt, learn, and sustain itself despite problems and challenges. To put such an imperative into perspective, the more we transfer technology from one place to another under the auspices of globalization, the more potential we are placing in the hands of the recipients to utilize those technologies in developing localized applications. Constant application of technology that packs more punch at lower cost is what SUSTAINS the drive toward localization. Without technology localization would merely be an updated term for the back-to-the-land movement of some 40 years ago. While localization may imply a different lifestyle choice, it is actually honoring well-deserved quality of life factors while continuing to take advantage of what an improved standard of living provides.

What happens beyond localization as technology continues its trek to become smaller, faster, stronger, etc.? Imagine assembling the end product from molecules – at the point of utilization – precisely at the time it is needed? Yes. Get small enough and one is into the basic building blocks of material: molecules. This is the realm of nanotechnology, specifically, molecular manufacturing.

While such a concept has the earmarks of science fiction or the paranormal and, indeed, there are many who contend it is one or both, technology will continue to shrink the distance from production to utilization until they are as close to the same as possible and the material manifestation will be of the immediacy and convenience of what is conceived virtually. The development timeline for molecular manufacturing suggests a useful output rests some distance in the future and that it will come at considerable expense.

This time is needed. Eric Drexler, one of the leading thinkers in the field of nanotechnology, co-founder of the Foresight Institute, and currently, Chief Technical Advisor for Nanorex, Inc. is a clear advocate for “responsible nanotechnology.” Citing the hypothetical possibility of the world turning into “gray goo” should molecular nanotechnology run amok, Drexler advises the imposition of a stringent ethical framework on these technologies before they are endowed with the capability of self-replication. Not bad counsel regardless whether one buys into Drexler’s future vision for nanotechnology.

And maybe that’s the reason we need to spend time in localization before leaping ahead to what’s next. It is the strength of the community experience where we learn to act upon our value as society rather than default to the strength and survival of the fittest individuals. This is the intent behind the Nanoethics Group. As an extract from their mission states, “By proactively opening a dialogue about the possible misuses and unintended consequences of nanotechnology, the industry can avoid the mistakes that others have made repeatedly in business, most recently in the biotech sector – ignoring the issues, reacting too late and losing the critical battle of public opinion.”

Yes. One can only imagine what happens if the machine – nanotechnology, in this instance – has the unfettered capacity to choose who survives with no more ethical framework in place to guide it than the ones we humans use today…maybe we are not quite ready for human equivalence!

Originally posted to New Media Explorer by Steve Bosserman on Tuesday, July 10, 2007

Boids, Integrated Structures, and Renewable Energy

About 20 years ago, Craig Reynolds, developed an artificial life program entitled, Boids, that simulates the flocking patterns of birds. One of the compelling features of Boids is that despite random starting points and infinite range of action enjoyed by each boid, through adherence to three simple rules a consistent behavior pattern among the boids is quickly established and maintained.

Boids exemplifies a principle in complex adaptive systems termed “emergence.” Emergence is a key concept in organization design. It has particular relevance when the issues of control, dependence, and autonomy in centralized and decentralized structures are recast into integrated structures such as networks, communities, and teams.

My previous posting, “Lessons from the Grid,” focuses on distribution of responsibility and authority to generate electricity, by whatever type of renewable energy source, to individual homeowners and business owners. Net metering connections to the grid enable owners to sell excess electricity generated to the utility company and draw from the grid as necessary during times of insufficient electricity generated locally. This is a win-win solution: an expanding network of home and business owners, representing multiple families, neighborhoods, and communities, are actively involved; participants meet their individual and local needs, first, then, sell their surplus to meet regional and global demand; and, the localization of electric power generation through “green energy” is more efficient and consumes less “brown energy.”

Distribution of electricity generation among the masses and the resulting win-win solution for the majority is an example of emergent behavior and the formation of integrated structures. Like “Boids,” this phenomenon is driven by three simple “rules” that define the social system in which emergence and integrated structures occur:

1) Universal participation.

The point of rapid development and deployment of information and communication technology (ICT) capabilities is to get everyone connected at a basic level. One need look no further than the geometric increase in the number of cell phones, Internet service providers, email addresses, blogs, videos, web-based services, etc. to see that the world is getting “wired!”

Every uptick in participation only heightens the number of advocates, providers, customers, buyers, and sellers available. Each has different experiences, perspectives, and ways of describing and meeting needs and wants. It is beyond the capability of highly centralized organizations to respond to the needs of so many independent agents. And it is beyond the capability of any one, “decentralized” individual to be both autonomous AND disconnected and expect to have needs and wants met while enjoying a respectable quality of life.

2) Meet individual and local needs, first; then, sell any surplus.

On its way to “human equivalence,” technology gets faster, smaller, stronger, more embedded, more integrated, and more intelligent with each turn in development. This has the effect of putting capabilities and capacities into the hands of the individual what was heretofore only available to the wealthiest or those with the largest assets to underwrite substantial ventures. The entirety of the Industrial Age is characterized by “managing” monopolistic interests dictating what was in vogue, what was available, and what was affordable. Now, with the Information (Digital) Age evolving into the Knowledge Economy and the “Relationship Age,” it is increasingly possible to dismantle the hulking centralized structures in the public and private sectors and distribute their power and authority to individuals and groups working in concert with one another at the grassroots. People at the local level can pull from vast global networks of “virtualized” information, knowledge, and resources and “materialize” them in local applications.

The result is people now have the means to meet their needs for fundamentals like food, energy, clothing, shelter, and safety without having to depend on others. It also creates the opportunity for them to produce MORE than they need so that the excess can be sold in further markets. This challenges the authority of comparative advantage when it comes to life-sustaining basics. Each day, advances in technology give more people the opportunity to produce sufficient renewable energy to feed, clothe, and house themselves – to meet their basic needs. And when people have their basic needs met, challenges to their security and safety are reduced; they can speculate, take risks, learn, and contribute their learning more broadly into global networks.

3) Consume what is produced locally, convert / process excess to standardized / higher value form, and ship to nearest point of use.

Unchecked globalization encourages people at local levels to compromise their buying power by sending raw or first-stage processed materials to worldwide destinations or further value-add processing. Because materials at this stage have their lowest value, the compensation for them is least. However, when finished products return from where further value is added their prices are out of reach. The net effect is the local economy is depleted of its resources and the people are unable to care for themselves. Of course, some corporations invest in facilities located closer to the raw or rough finished materials to take advantage of lower cost labor in subsequent value-add processes and stages. The finished goods are priced beyond the reach of employees and their compensation is insufficient to afford necessities. Once again, they are unable to care for themselves at a local level. Worse yet, the cost in use of fossil fuels to transport raw materials, work-in-process, and finished inventory from one part of the world to another only exacerbates the problems besetting local economies mentioned previously.

The “localization-to-globalization” model operates in reverse. It encourages people to consume what they produce rather than sending it elsewhere only to have to buy it back later. Also, it fosters the conversion of excess into standardized form of higher value in order to have a broader market which is easily accessed. Using renewable energy sources like solar, wind, biogas, etc, to generate electricity has more efficiency than the individual sources of energy because the energy is converted from a more difficult to use form to a standardized form. As an example, everyone can use electricity pulled from the power grid. Not everyone can use DC current from a photovoltaic array or a tank of biogas, although each can be used to generate electrical power for the grid.

These three “rules” drive the formation of many different integrated structures as localization takes root and globalization builds from it. How well these rules are followed in the development of business cases and plans is an indicator of the viability of the business under consideration.

For example, earlier this month, Biopact announced the headline, “Green giant Russia to produce 1 billion tons of biomass for exports.” That’s a lot of raw material! Now, will Russia process it into fuel or ship it elsewhere for processing? The article is unclear which direction this will go. However, it would seem that the environmental advantage of growing biomass material for fuel would be offset by the amount of fuel required to transport the raw material to a remote point for processing. In addition to the logistics issues, a business plan built on the comparative advantage Russia apparently has to grow biomass but not to process it into usable fuel is risky. Expecting another region or country to invest in the processing facilities yet not have control over the flow of raw material from considerable distance away is…well…dicey.

In contrast, Iowa grows more corn¹ ethanol than any other state. It could ship corn to other states to process ethanol. However, the approach is to localize ethanol production from corn² and keep the value in the hands of the producer while reducing transportation costs. Maybe there’s another lesson in here from the Iowan farmers?!

More business possibilities will be analyzed according to these three rules in subsequent postings…stay tuned!

Originally posted to New Media Explorer by Steve Bosserman on Monday, February 12 2007

Original link no longer available. ↩
Original link no longer available ↩

Food Systems and Distances Traveled

Food is an essential requirement for life. A certain degree of psychological preoccupation is prompted if there are risks associated with getting the need for food met. As a result, securing food is one of the fundamental building blocks in Abraham Maslow’s “hierarchy of needs.”

Distance from the source of food is a sticky wicket for food consumers. We are left in the hands of government regulations, enforcement agencies, businesses, and various special interest groups in between us and the food we need for survival, health, and well-being. Questions range from plant and animal genetics to methods of production, processing, and preparing foods, to the logistical systems that transport, store, and stock what we eat as it moves from the point of production to the point of consumption.

So how far is it from the point of production to the point of consumption? According to a 2003 study, “Checking the Food Odometer: Comparing Food Miles for Local versus Conventional Produce Sales to Iowa Institutions,” by Rich Pirog at Iowa State University it can be further than one might think. For a synopsis of Pirog’s study, please read Consumers Prefer Locally Grown Foods published by the WK Kellogg Foundation.

Drawing from Pirog’s report, Jane Black offers the following analysis in her article in Slate entitled, “What’s in a number? How the press got the idea that food travels 1,500 miles from farm to plate:” ¹

All statistics, of course, are based on a series of assumptions. And Pirog is quick to point out that whether or not the 1,500-mile figure applies to everyone and everything—or how it’s been misused—it has raised consciousness about where food comes from. It sends a message: It matters what you buy, and where you buy it.

The graphic below illustrates some of the critical relationships in the current, globalized food system relative to distances food travels.

Essentially, the diagram is a continuum from local to global with regional and continental “zones” setup to offer arbitrary hash marks at the 100, 1,000, and 10,000 mile intervals in between. Clearly, the distribution of distance favors production, processing, and preparation encompassing more than 1,000 miles. Also, the interplay of production, processing and preparation, and consumption is embedded within a logistical system that supports the movement of plant and animal materials from one location to another while transferring from one production / processing stage to another.

This diagram does not attempt to quantify the complete distance traveled, but offer a way to visualize the approximate distribution of mileage when looking at the overall food system. While Pirog’s report focuses solely on fresh produce and excludes various stages of processing between production and consumption, if one included the distances incurred by these additional steps the total mileage traveled would be considerably further. Also, due to the economies of scale favored by globalized operations, processing and preparation are centralized in specific locations that enjoy advantages of lower cost labor or closer proximity to large scale production operations. This adds to total distance traveled when completing the cycle to the consumer.

In his book, PERMACULTURE: A BEGINNER’S GUIDE, Graham Burnett offers a diagram entitled, “The Industrialization of Tea” that captures the notion of distance in the globalized food system and its consequences. When the total costs of fossil fuel consumption is treated as an externality and there is relative assurance that globalized food sources are secure and can provide safe food at low cost the food system functions effectively. But what if the formula changes due to increased fuel costs? What if we cannot assure food security and safety? What is an alternative? Mr. Graham begins to explore this question by providing a second diagram, “The Permaculture Cup of Tea,” posted on the same website.

In carrying the philosophy of a “permaculture cup of tea” further, the diagram below follows the same general format as the previous graphic, only the food system is more localized than globalized.

Now, 60 % of the food system functions within an area under 1,000 miles of the point of consumption. While this stops far short of 100% under 1,000 miles, it does suggest that simply moving a mere 30% of the total food system output from over 1,000 miles to under will have a profound impact on the issues like fuel consumption, food security and safety, and community sustainability, health, and well-being. But how much difference would this really make?

While there are no data to tell us for sure, there are reports from studies in related fields that offer some insight. In The New York Times article by Matthew Wald published December 30, 2006 entitled “Travel Habits Must Change to Make a Big Difference in Energy Consumption,” the author states,

…picking a large sport utility vehicle that goes two miles farther on a gallon of gasoline than the least-efficient SUV’s would have an impact on emissions of global warming gases about five times larger than replacing five 60-watt incandescent bulbs. The dollar savings would be about 10 times larger. And the more-efficient light bulbs would have a negligible effect on oil consumption.

This suggests that shifting the 30% of the current food system activity to under 1,000 miles from the point of consumption would make a substantial difference.

There is a business case in this for sure; but how would one go about putting the business model together that leads to viable business plans and startups in localized agriculture? The key is in designing a framework that ties the critical elements of food production, processing and preparation; renewable energy and environmental remediation; logistical systems; and community sustainability together into a set of dynamic, interactive, and adaptive relationships. And that will be the topic for subsequent postings…

Wishing you all the very best in 2007!

Originally posted to New Media Explorer by Steve Bosserman on Tuesday, January 2, 2007

The original article, “The Issues: Buy Local,” is no longer available online ↩

Addicted to Oil

On 31 January, President George W. Bush delivered his 2006 State of the Union Message. In it he made a very powerful declaration:

Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world. The best way to break this addiction is through technology. Since 2001, we have spent nearly $10 billion to develop cleaner, cheaper, and more reliable alternative energy sources — and we are on the threshold of incredible advances.

While history will be the final determinant of President Bush’s impact on history and the degree to which it was favorable or not, the statement, “America is addicted to oil,” may standout as a turning point for America. While this reality was not new news for millions who listened to or read his speech, the mere fact that he gave voice to it as the elected leader of the American people was a powerful expression of what it represents. It may very well constitute the most key assertion of his administration.

Addiction is a tough term to reconcile; it is a psychological reality that takes no prisoners, so to speak. Addiction means dependency in the most profound way. Such dependency in this instance drives three potential outcomes:

Depletion: what happens if we run out of oil?
Defense: what happens if government leaders from countries where we buy oil use the money to our disadvantage costing even more money to protect ourselves and our way of life
Destruction:¹ what happens to the environment if we persist in using oil (fossil fuels)?

It isn’t necessary to know exactly when we reach Hubbert’s peak, or to know how much money it takes to defend ourselves against foreign forces that are funded by money we pay to them for their oil, or to know how much burning fossil fuel affects the environment. It is only a matter of believing that any one or a combination of them is in play to trigger intense concern. Such is the powerful hold addiction has on those in its grasp.

The significance of President Bush’s statement is that it legitimizes conversations and commitments to seek viable alternatives. And because there are three motivating forces, each equally compelling, triggered by his statement, there is a much wider audience who buys-in to the notion that the fundamental issue of oil addiction warrants attention. Time and energy do not need to be wasted convincing people to get on board. It is proving to be an efficient way to mobilize people, resources, and investments in finding viable alternatives.

We do not have answers; at least we have questions that are moving us in a healthier and more sustainable direction. Swapping fuels derived from plant materials for fossil-fuels offers a way to ease the problem, but it is not a panacea. It will be a race to see if we can slow consumption, adopt non-fossil-fuel alternatives, and develop more efficient ways to produce and move what we make from one place to the other. This is an area of considerable interest to me as 2006 wanes and 2007 creeps closer. More later…

Originally posted to New Media Explorer by Steve Bosserman on Sunday, December 10, 2006

The quoted 2005 report from the Union of Concerned Scientists is not available online, however, a later statement, Car Emissions & Global Warming, addresses the same issue:“Our personal vehicles are a major cause of global warming. Collectively, cars and trucks account for nearly one-fifth of all US emissions, emitting around 24 pounds of carbon dioxide and other global-warming gases for every gallon of gas. About five pounds comes from the extraction, production, and delivery of the fuel, while the great bulk of heat-trapping emissions—more than 19 pounds per gallon—comes right out of a car’s tailpipe.” ↩

Localize – Link – Globalize: A Closer Look at India

In my previous posting about Mukesh Ambani’s ambitious plans for Reliance Retail, Ltd., he intends to “revolutionize” two sectors: farming and retail in the process of establishing this new business. His plan to “invest more than $5 billion by 2011 to put both the farms and the stores on the road to modernity, connect them through a distribution system guided by the latest logistics technology, and create enough of a surplus to generate $20 billion in agricultural exports annually” is a bold statement of the speed, scope, and degree to which he will attack the prevailing system. No doubt this will have an impact – revolution does that, although there are often unintended consequences!

Usually, “revolutionize” in the context of agriculture means introducing labor-saving, automated, integrated mechanical and biological systems that eliminate the need for human participation. This accomplishes three things: reduces the cost of the operation by taking people out of the equation; displaces people who are no longer needed in support of agriculture so that they are compelled to do something else; and lengthens the distance between the point of agricultural production and the point of consumption of food, feed, fiber, or fuel. This approach was effective during the last century in those areas of the world where human labor was needed to power the growth of the industrial sector. In fact, the mechanization of agriculture and the subsequent displacement of people from farming and rural areas was a perfect complement to the growth of industries in the urban centers. Is the world ready for more of that?

The last thing countries with the most populous cities in the world need is more people migrating from the less populated rural areas to the urban areas. Further overcrowding of already overwhelmed infrastructures helps no one and contributes further to decline in the quality and even sustainability of life. Still, with nowhere else to go and no hope where they are, relocation to the cities is often the only recourse people have in these circumstances.

The question is: how can technology be applied in the farming sector such that the people whose welfare is dependent on agriculture are able to have sufficient quality of life centered around the principles and values they hold dear at their local community level yet be able to scale their output to meet the demand of more distant communities in need of what they produce?

One way to begin to answer this is through the e-Choupal system introduced by ITC, Ltd. to farmers throughout rural India.

ITC describes e-choupal as a system that…

…leverages Information Technology to virtually cluster all the value chain participants, delivering the same benefits as vertical integration does in mature agricultural economies like the USA.

‘e-Choupal’ makes use of the physical transmission capabilities of current intermediaries – aggregation, logistics, counter-party risk and bridge financing – while disintermediating them from the chain of information flow and market signals.

With a judicious blend of click & mortar capabilities, village internet kiosks managed by farmers – called sanchalaks – themselves, enable the agricultural community access ready information in their local language on the weather & market prices, disseminate knowledge on scientific farm practices & risk management, facilitate the sale of farm inputs (now with embedded knowledge) and purchase farm produce from the farmers’ doorsteps (decision making is now information-based).

Real-time information and customised knowledge provided by ‘e-Choupal’ enhance the ability of farmers to take decisions and align their farm output with market demand and secure quality & productivity. The aggregation of the demand for farm inputs from individual farmers gives them access to high quality inputs from established and reputed manufacturers at fair prices. As a direct marketing channel, virtually linked to the ‘mandi’ system for price discovery, ‘e-Choupal’ eliminates wasteful intermediation and multiple handling. Thereby it significantly reduces transaction costs.

‘e-Choupal’ ensures world-class quality in delivering all these goods & services through several product / service specific partnerships with the leaders in the respective fields, in addition to ITC’s own expertise.

While the farmers benefit through enhanced farm productivity and higher farm gate prices, ITC benefits from the lower net cost of procurement (despite offering better prices to the farmer) having eliminated costs in the supply chain that do not add value.”

Of course, for ITC to make this work requires a dedication to growing its business by engaging farmers as partners in making their businesses successful. ITC’s sustainability policies are based on a deep and unwavering commitment to the people of rural India: to help them improve the quality of their lives, provide them with the wherewithal to keep their families intact and grounded, and contribute fully to the betterment and sustainability of their local communities.

The effectiveness of this program on multiple fronts has not gone unnoticed. ITC has garnered several awards for the e-Choupal program namely, the Corporate Social Responsibility Award in 2004 from the Tata Energy and Resources Institute (TERI), the Wharton Infosys Business Transformation Award (WIBTA) in 2004, and most recently the Stockholm Challenge Award in May 2006.

The goal of e-Choupal is to sustain, strengthen, and scale the operations of farmers with small agricultural holdings throughout rural India. The success of this system is earmarked by farmers staying in business, improving their operations, caring for their families, and contributing to the welfare of their local communities. This outcome scores well in following the sequence of localize, link, and globalize mentioned in last week’s posting by the same title.

And there is room for more! In a country of one billion people, three-quarters of which live in rural areas the efforts of ITC and e-Choupal only touch a narrow few. Reliance Retail, Ltd. is branching out with farming and retail and is committed to build an infrastructure that stabilizes small scale farming operations rather than destroy them; in direct competition to Reliance Retail, ITC is introducing Choupal Fresh.

Then, there are companies like Bharti that partnered with the Rothschild Group to form FieldFresh Foods. They are entering the next stage of scaling up agricultural production in rural India to supply global markets. Are Indian farmers sufficiently stabilized in their newfound capabilities to remain sustainable as small businesses in light of this rapid scaling?

Andy Mukherjee writing for Bloomberg.com paints companies Reliance, ITC, and Bharti with a common brush regarding their intentions for the Indian farmers in light of a worse fate – Wal-Mart. The title of his article “Indian Food Trade Lures Reliance, Bars Wal-Mart,”¹ suggests that a preferred strategy is keeping Wal-Mart at bay. Unfortunately, there are many paths that lead to premature globalization of food production at the farm level – even a seemingly healthy alliance between Bharti and Rothschild is fraught with difficulties!

Clearly, a Wal-Mart excursion into India would have a significant impact on the economics of farming and retailing in India. It poses a dilemma in whether to keep expanding the agricultural sector globally by building from a firm foundation of localized – linked – globalized farming operations, or prematurely opening the floodgates to global markets, compromising the system at local levels, and either becoming non-competitive due to excessive cost or entering the slippery slope of farm consolidation.

The title of a Knowledge@Wharton article, “Will Wal-Mart Succeed in India? Perhaps…But It Won’t Be Easy,”² suggests imminent conflict with Indian retail chains and the Indian government in their unwillingness to allow direct foreign investment into the retail industry. In response, Wal-Mart has formed a joint venture with Bharti. Will that be enough to overcome native resistance? And in “Wal-Mart Pushing India to Lift Ban on Global Chain Stores” published in The Hometown Advantage by The New Rules Project, the argument is raised that large non-Indian retailers like Wal-Mart are not good for the local Indian economy because their realm of interest is with absentee shareholders, not the people of India at the local level. Proceeding further while carrying this lack of concern for the impact one’s business model has on people whose livelihoods are placed squarely at risk is catamount to unethical business practice. In this case, it reverses the preferred approach of localize – link – globalize to drive globalization first and align linkages to suck profits and resources away without stabilizing the local economies first.

The world has endured this “global first” extraction / domination model for centuries. It doesn’t work. It’s time to give it up!

Originally posted to New Media Explorer by Steve Bosserman on Sunday, September 3, 2006

Original Bloomberg article, “Indian Food Trade Lures Reliance, Bars Wal-Mart,” is no longer available online ↩
Original Asia Media article, “Terms of Engagement for Wal-Mart India,” is no longer available online. ↩

Localize – Link – Globalize

In the 17 July 2006 issue of Newsweek International, an article by Ron Moreau and Sudip Mazumdar entitled, “Bigger, Faster, Better: India’s top tycoon hopes to kick the country’s nascent boom into hyperdrive by remaking its stores, farms and even its biggest cities,” provides a compelling twist in corporate social responsibility. Earlier this year, Mukesh Ambani, chairman of Reliance Industries, Ltd, announced the creation of a new, major business venture under the Reliance umbrella, Reliance Retail, Ltd. This is only one step in Mr. Ambani’s far-reaching vision in retailing that seeks to bring broad-sweeping changes in agricultural production and retailing across India as well as how people live in urban areas:

…Ambani, 49, has finalized plans to invest more than $11 billion over the next decade to build two new satellite cities outside creaking, overcrowded Mumbai and Delhi. He foresees these metropolises emerging within just four years, each with a population of 5 million people making $5,000 a year, on average (or seven times India’s norm), and hosting top multinational companies. And that is all pretty simple – a development on steroids – compared with the idea that really gets Ambani going.

Ambani’s favorite scheme aims to revolutionize in one swoop two of India’s largest but most backward sectors: farming and retail. Despite boom times, India is still a nation where 100 million mostly small farmers work with ox and plow, where 96 percent of retail stores are mom-and-pop shops and most of the roads between farm and store are mud tracks. Ambani plans to invest $5 billion by 2011 to put both the farms and the stores on the road to modernity, connect them through a distribution system guided by the latest logistics technology, and create enough of a surplus to generate $20 billion in agricultural exports annually.

I don’t have a clue whether Mr. Ambani will be successful in achieving what he envisions. Actually, that is not the point. What is significant, though, is that he apparently understands the connections between the circumstances surrounding those who produce food, and food production, logistics, and retail sales to consumers; he is willing to challenge the inadequacies and deficiencies in the current system; and even more, he is taking no small risks in making a significant play to install an alternative system that is more respectful, efficient, and sustainable for those who participate at the “ground level,” so to speak.

Basically, Mr. Ambani is addressing the problem by taking an approach that runs backwards from the conventional wisdom of a globalized model. He is, first, raising the capability and capacity of the farmer / producer, establishing an infrastructure to move productive output swiftly and safely to downstream stages in the value-chain, and providing fair compensation for the farmer / producer to assure sustainability:

To transform Indian farmers into quality suppliers for his new retail chain, Ambani plans to create 1,600 farm-supply hubs across India, providing technical know-how and credit, selling seeds, fertilizer and fuel, and buying produce.

Then, he is scaling the output of the farmer / producer to exceed local demands for food stuff and move the overage into the global market:

He also plans to build some 85 logistics centers to move food to retail outlets and to ports and airports for export. Reliance is gearing up to train tens of thousands of new employees in the next six to eight months to do everything from erecting prefab warehouses to transporting fresh produce. Even Reliance’s admirers note that with little experience in farming or retail, Ambani is taking his biggest risks yet. “There will be mistakes,” Ambani admits. “But we are not scared. We will correct our mistakes fast and move on.”

This is opposite to the typical globalizing business model that strips output from agricultural producers for a pittance and pumps it into the global market at the outset without regard or interest in the sustainability of the producer’s business or preserving the sanctity of the local community. The consequence of the more typical approach is farm consolidation, loss of livelihood and location, and dependence on globalized agriculture for local food supplies – not a good position to be in if supply chains are disrupted.

The critical path is to stabilize the producer / provider at the individual / family / community level; link producers / providers with others through flexible and dynamic networks capable of moving information, goods, and services in response to demand AT A LOCAL LEVEL; and lastly, scale the operations to match output with fluctuations in demand on a global level. This simple three-step formula – localize, link, and globalize – is a useful scorecard to measure the validity of any strategy aimed at utilizing natural resources or leveraging human resources in particular areas. If it strives to globalize first or prematurely, the approach is exploitative at best and unconscionable at worst!

Originally posted to New Media Explorer by Steve Bosserman on Sunday, August 27, 2006

Adding Value and Receiving Fair Compensation

There are three ways to add value: make something others need / want; provide a service others value, but not enough to do it themselves; and, deliver a totally satisfying experience around a package of something(s) made and services provided.

When I entered the business world in the U.S. some forty-plus years ago, it was all about exploiting natural resources elsewhere and making things in highly, vertically-integrated production enterprises. Over the last 25 years, there has been a distinct split between making things and providing services others would rather not spend their time doing, vertically-integrated firms were decentralized and distributed, and U.S. businesses have “gone global” in an effort to exploit human resources elsewhere. During the last 10 years, there has been a significant uptick in melding a particular desired experience with things and services to provide an integrated, experiential package. The work I currently do with businesses and non-profit organizations focuses on helping them take advantage of this shift and get more efficient and effective at doing the integration and promoting the anticipated experience with customers.

The process Andrius Kulikauskas followed in the Chocolate Project to collect and compile information about the chocolate industry yielded a potential goldmine of business opportunities. These include:

Making things – beans, nibs, cocoa liquor, cocoa butter, cocoa powder, finished chocolate products ready for retail – up and down the value chain
Providing services such as logistics, inventory management, quality assurance, traceability, trading, etc.
Developing integrated, experiential packages using chocolate as the centerpiece -a posting from Idziak Waclaw outlined ways to think about such possibilities

For that matter, the process, tools, and techniques Andrius used for the project can be replicated in other projects where there is a similar opportunity to merge openness with the proprietary in ways that “do no harm.” Some of the approaches Andrius used in the Chocolate Project include the following:

Working openly / working in parallel wiki where all the information gathered was categorized and posted for the world to look over the participants’ shoulders and see
Focused moderation to keep collaborative energies and efforts in the spaces where the value would be greatest for the sponsor
Direct correspondence with the sponsor to assure that proprietary boundaries are honored

No doubt there are more. The point isn’t to be exhaustively philosophical in what they are, but to apply the ones we can do elsewhere for broader benefit. As an example, currently, I am floating the concept of a wiki to a private sector client wherein key questions related to the business are posed by the moderator. The wiki is organized to “catch” the responses in ways that prompt more questions and accelerate the exploration of those strategic spaces where the client’s business will be heavily influenced over the next 5-10 years.

As another example, several colleagues and I are completing a grant proposal which will be submitted later this month that explores characteristics of leadership in institutional contexts where the key objective is to prompt a higher rate of adaptation and responsiveness within non-profit organizations. One of the major elements of the strategy we are proposing is the use of a moderated wiki a la the Chocolate Project. Our intent is to create an extensive library of information on the wiki about leadership that is open to all, yet we are able to extract and compile specific content into publications that target particular audiences within the non-profit arena.

The bottom line is that this approach can be leveraged / applied over and over again to generate an enormous amount of information on a particular subject, identify potential candidates to participate in a supportive broad-based network, and develop opportunities to add value. However, adding value is only half of the equation:

On New Year’s Day, there was a posting on the Yahoo! Group, Cyfranogi from Stephen DeMeulenaere, about the organization he represents – Complementary Currency Resource Center. It makes a strong connection between adding value and receiving fair compensation. When people are compensated, in part, with a complementary currency that remains in the local community where it was earned, its expenditure continuhttps://www.linkedin.com/in/stephendemeulenaere/es to benefit the community. The bulk of mainstream financial systems used to compensate people for value-add are extensions of hierarchical and global political / economic systems. They are organized to concentrate power and wealth in the hands of a few. As a result, when people are compensated solely by these global, federally-backed currencies their expenditures remove the purchasing power from the community to a place far afield from the point of value-add.

Unfortunately, there is no system we can devise that escapes this reality – inequalities among people drive inequalities in access to power and wealth. What we can do, though, is experiment with more locally-based, complementary currency systems that mitigate the forces of concentrating wealth on the global level from draining creativity, energy, and resources from local communities. Andrius’ approach to blending federally-backed compensation with home-grown complementary currency compensation on the Chocolate Project is a start. As this blending is pursued on other projects, the experience base will be broadened and the mettle of the emerging complementary currency systems tested so the combination between the two becomes more robust, scalable, and, ultimately, effective.

Projects born in a social network are only as good as there are participants representing a wide and comprehensive set of perspectives about the topics under consideration. People are attracted to these efforts within a social network by a variety of reasons: alignment on the values the project leader and other participants hold dear and readily espouse; affinity for and commitment to the cause being advanced by the project; recognition for performance which can be carried into other opportunities where more compensation is available; and, fair compensation for value-add. Obviously, the more of these a project offers the higher the likelihood of widespread participation. For this reason, if an alternative to federally-backed currencies can be offered which fairly compensates people for the value their contributions add then, the chances are substantially increased that the creative talent, skill, and expertise in the social network can be tapped. The challenge is to know that we are nowhere close to where we need to be and to keep trying!

Originally posted to New Media Explorer by Steve Bosserman on Tuesday, January 3, 2006