Food Systems, Economies, and Ecosystems

What We Are Doing

Over the past three months several of us have made presentations to various groups providing an overview about the recently awarded USDA-SCRI grant proposal and our general strategy for the ensuing program. Our primary purpose is to facilitate the continuing development of local and regional food systems as a viable and sustainable counterbalance to the predominate global food system. Ideally, local and regional food systems work seamlessly with the global food system to form a total food system that provides the overall advantages of price, variety, and quality while contributing to community health, vitality, and well-being.

Local and regional food systems, together with renewable energy and distributed manufacturing, are an integral part of local and regional economies. The interdependence of these three features prominently in the design of our strategy. While the mission of our USDA-SCRI initiative is focused on food systems, when seen in the bigger picture these systems become a platform by which local and regional economies are established, strengthened, and grown. Building local and regional economies is our broader agenda.

A local or regional economy is shaped by the social, political, cultural, and geographic context and conditions in which it exists. Such an economy is defined by complex webs of interwoven interrelationships and behavior patterns. Because of this characteristic, our understanding of them is benefited by adopting an ecological perspective or seeing them as part of ecosystems.

There are several types of ecosystems: natural, human, urban, etc. Each of them is characterized by several factors such as participants, source – sink dynamics and flow, and landscape patterns. Using these factors to inform an ecosystem health index and provide insight on how well an ecosystem is functioning is of particular interest.

Such an index is especially helpful when determining which course of action among several alternatives achieves the imperative at hand with the least amount of collateral damage and unintended consequences or side-effects. An obvious instance is with agriculture because of its pervasiveness and the degree of environmental impact its practice has on a local, regional, and global scale. Under the aegis of the USDA-SCRI grant there will be ample opportunities to apply the metrics of agroecosystem health in helping local and regional food systems become more efficient, effective, and less disruptive counterparts to the global food system.

The Business Ecosystem

Adopting an ecosystems view is also helpful within a business context. In the mid-1990’s, Jim Moore observed the dynamics of natural ecosystems and noted the similarities they have with those in a business setting. He coined the term business ecosystem to label the dense webs of interrelationships among suppliers, service providers, customers, competitors, communities within a social, political, and economic environment in which any given business starts, survives, and is sustained.

Moore’s “business ecosystems” thinking has led to a unique and powerful understanding about business strategy and in so doing significantly expanded the business development repertoire. It has also encouraged the growth of small and medium-sized enterprises (SMEs) in several areas. Perhaps the greatest experimentation with this approach has been Europe where the European Commission (EC) linked Moore’s concept business ecosystems concept with Information and Communications Technology (ICT) to form digital business ecosystems. The primary purpose at the outset was to establish networks of connectivity among participants in SME ecosystems in order to stop the decline in the numbers of SMEs in several European countries. Early results show this strategy is successful as indicated by a reversal in the decline of SMEs complemented by signs of an increase in their numbers across the Continent.

Business Ecosystems in the Context of the USDA-SCRI Grant

Fundamentally, the strategy underscoring the USDA-SCRI grant proposal is the digital business ecosystems approach applied to local and regional food systems. The graphic below illustrates the flow dynamics among ecosystem participants in the interconnected regions across the upper-Midwest and mid-Atlantic states:

Social network facilitation, as part of the ICT backbone for the project, catalyzes regional networks and convenes leaders within them to prompt the formation of business ecosystems.

Business ecosystem particants conduct research, deliver education and training, and launch pilot projects directed toward building local food systems within given regions.

Local food systems development links with complementary efforts in renewable energy and distributed manufacturing systems to drive relocalization. This heightens participation at local levels which increases the experience base among players and drives changes in the formulae for land use practices, inclusion, workforce development, and government collaboration. The net effect is that the rules are rewritten so they facilitate the rise of functional and sustained local and regional economies.

Healthy, vibrant, adaptive, and innovative local and regional economies offer a constructive counterbalance to the global economy; they become attractors for new business start-ups and the expansion of existing businesses. Glocalization results as fully-functioning local and regional economies mitigate the downsides of the global economy and position the total economy for sustainable growth. Successful glocalization feeds larger regional networks of players and leadership of business ecosystems providing the wherewithal to fuel additional research, education, and pilot projects. This closed-loop cycling generates AND reinvests resources within the same local and regional economies which relieves the dependency on outside funding, like the USDA-SCRI grant, to spur local and regional economic sustainability and vitality.

A Broader Vision

The bottom line is that with thriving, interconnected business ecosytems, local and regional economies capable of maintaining themselves while spurring business growth and community well-being will result. Although the USDA-SCRI grant is directed toward social networks and local food systems, these are milestones along the path to a broader claim. Our vision is of capable local and regional economies operating in concert with the global economy to provide people with the means to enjoy a reasonable quality of life in communities assured of survival and sustainability. For us, this is the ultimate goal of the grant proposal. Thanks in advance for your participation over the next three years to make the vision a reality!

Originally posted to Local Food Systems by Steve Bosserman on December 27, 2008 17:04

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?

  1. 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.
  2. 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.
  3. 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:

  1. Limit producers’ portfolios to one of two kinds of birds. Worse yet, consolidate the number of producers into one or two large-scale producers.
  2. Distance the mobile poultry processing unit from the producers or those in downstream food preparation and value-add processing.
  3. 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

Mobile Slaughterhouses (Abattoirs) as a Solution to Meet the Demand for Blessed Meats in Central Ohio?

Recently, I have had several conversations about local foods with refugee-immigrants from a wide range of African nations who are currently living in the central Ohio area. Whether from the Horn of Africa in the east to Nigeria, Ghana, and Cameroon in the west, they show a keen interest in locally produced, processed, and prepared foods, especially those that come from or are closely akin to what they had available in their native lands. No where is this interest more evident than in “blessed meats” such as “halal” and “kidus” as evidenced in an article by Sherri Williams entitled, “Growing Immigrant Communities Seek Blessed Meat” published in the November 19, 2004 edition of the The Columbus Dispatch.

Over the past four years since this article was written, production output of blessed meats has increased in the Columbus area. However, market demand for locally produced and processed meats continues to exceed supply. This suggests a wide range of business opportunities in response. For the purpose of this posting those opportunities are centered on the construction, operation, and maintenance of mobile slaughterhouses (abattoirs) that are licensable by the USDA.

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Excerpts below from an article in the January 10, 2008 issue of Sheep and Goat Notes published by the Kentucky Sheep and Goat Development Office entitled, “Sheep Farmers Feeding Rising Appetite for Lamb” by Gail Martineau for The Columbus Dispatch offer more details on the current situation:

Katherine Harrison Haley, manager of Blystone Farms…said her business has boomed since the farm’s slaughterhouse opened in 2004. On average, the company slaughters 50 to 75 animals a week to meet the demand for lamb in central Ohio, particularly among the growing Muslim population.

Joe Blystone, owner of the Blystone Farms, said he sells meat to Columbus’ Somali immigrants, who visit the farm, choose an animal and wait for it to be processed in the slaughterhouse.

“We knew we had a market even before we started,” Blystone said. Harrison Haley said the flavor of hair sheep is similar to that of their African relatives.

Blystone Farms also adheres to Islamic slaughtering practices, which call for the animal to suffer as little as possible.

“We do employ two butchers who are Muslim,” Harrison Haley said. “The kill is done in a very quick and humane manner.”

Osama Saleh, a Muslim and owner of two local Mediterranean markets that carry sheep meat, said he thinks the flavor of locally produced lamb is much better than that of imported meat. “I’ve tasted the Australian and New Zealand meat, and it tastes like it was in the freezer,” Saleh said.

He also said he hopes to get a piece of the growing market. “I wish I had extra cash to open a slaughterhouse,” Saleh said.

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The answer may be a mobile slaughterhouse. A Chowhound blog posting by Jason Krause on October 31, 2006 entitled, “I’ll Pay You to Kill My Steer: It’s Not So Easy for Small Farmers to Get Their Animals Slaughtered,” focuses on the disappearance of smaller meat processing facilities:

According to the Food Safety and Inspection Service (FSIS), the number of federally inspected meat-processing plants fell by about 200 between 2001 and 2005. About half that disappeared were very small plants, or businesses with ten or fewer employees and no more than $2.5 million in annual sales. The smaller guys simply couldn’t compete due to labor costs and stringent new food safety regulations. At the same time, big slaughterhouses consolidated into just 366 giant centers across the country. Small ranchers often are far from these centers. Besides having too few animals for large slaughterhouses to care about, sometimes the animals themselves present a nuisance.

Mr. Krause goes onto offer a solution put into play in Washington State:

A group of farmers in Washington state has developed a novel solution: a mobile slaughterhouse. Pulled by a diesel truck, the refrigerated car is equipped to kill and process everything from birds to cows. It’s USDA approved and can meet small farmers at their doorsteps. It can handle only five to nine steers a day, but its small size is seen as a virtue by its farmer customers.

The farmers built their mobile slaughterhouse after trying to build a permanent one in the area and getting shut down by their neighbors.

On the outside, it looks like a large horse trailer. Inside, it has three sections for processing, refrigeration, and storage. One person can run the whole operation, and farmers pay $75 per animal. The carcasses are then taken to a facility where they’re cut into portions. Farmer Bruce Dunlop, who helped spearhead the cooperative of Washington farmers that built the slaughterhouse, says it cost about $150,000, versus the $400,000 he says a small permanent facility would have cost to build.

After three and a half years of operation, the cooperative now works with about 45 farms in a four-county, hundred-mile area. The mobile slaughterhouse is available all year, but June to December is the busiest time. “It’s a tiny percentage of what the big slaughterhouses do, but for small and medium-sized farms, it’s significant,” says Dunlop. “It’s not a get-rich-quick operation for anybody, but there is enough demand for locally grown meat to keep it going.”

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This same solution is being implemented in Vermont as indicated in an article by Peter Hirschfeld in the January 14, 2008 issue of the Vermont Press Bureau entitled, “Mobile Slaughterhouse Coming to Vermont,” which is copied below for your convenience:

MONTPELIER – A mobile slaughterhouse will likely be on the move in Vermont by spring, allowing small Vermont poultry farmers to reap increased profits in new retail markets.

The 32-foot trailer, with a killing room, scalding pot and processing area, will offer small and mid-size farmers the state inspection credentials needed to sell their birds in local cooperatives and grocery stores.

“The plan right now is to have it operational by spring time,” said Anson Tebbetts, deputy secretary for the Agency of Agriculture.

The Legislature approved funding for the approximately $80,000 slaughterhouse last year. The move is part of a larger plan to augment agricultural infrastructure in the state and capitalize on the ever-growing “Buy Local” movement.

For most farmers, trucking live poultry to the nearest USDA facility in southern Vermont is cost prohibitive, rendering their uninspected birds illegal for sale in cooperatives and other retail outlets. The mobile slaughterhouse, which officials say will process up to 200 birds a day, will offer the state-inspection stickers that have thus far kept small farmers out of nearby food stores.

“The key part is inspection, so it opens up every market you can imagine,” Tebbetts said. “(Poultry) could be sold at schools, restaurants, hospitals, back to the state government. That’s sort of where we’re heading with this.”

Neither the Agency of Agriculture nor Rural Vermont, an advocacy group that lobbies on behalf of the state farmers, tracks the number of small poultry farmers in Vermont.

“I don’t think there’s a clear understanding of how many folks are out there that might take advantage of this,” Tebbetts said. “The initial plan is to run 8,000 birds through the unit in the first year, but we really don’t know how many folks are out there.” The availability of the new slaughterhouse may compel new farmers to enter the wholesale and retail bird market and allow existing farmers to expand their flocks, Tebbetts said. John Clark operates Applecheek Farm in Hyde Park. He and his wife raise free-range boilers, stewing hens and heritage turkeys on their McFarlane Road operation. Clark benefited from a key agriculture bill passed last year that allows poultry farmers with up to 1,000 birds to sell their meat at farmers markets and restaurants. He said the mobile slaughterhouse will further expand the opportunities. “In my situation, it’ll be really helpful because I’ll be able to sell in more markets and not be limited by the 1,000-bird limit,” Clark said.

“Right now you can’t sell to a co-op unless you bring it to a USDA facility, which is really limiting for small-scale farmers.”

The mobile slaughterhouse will be leased, sold or rented to an independent operator who will have to offer services at an “affordable” cost, though details are still sketchy. Tebbetts said the state may fund the construction of more mobile units as demand warrants. The mobile slaughterhouse may well provide federal inspection as well, allowing Vermont farmers to sell in national chains like Whole Foods Market, which, according to Tebbetts, has already expressed interest in sourcing whole birds from Vermont. The mobile slaughterhouse will on occasion travel to fairs and field days around the state, where farmers will be able to bring their birds for slaughter on the premises.

A push is now under way to offer similar services for red-meat farmers seeking similar accommodations for their hogs, lamb, goat and beef, though mobile facilities for those products cost about double the poultry unit.

“It’s part of the whole strategy,” Tebbetts said. “We’ve worked on promotion and marketing, but we also have to keep an eye on infrastructure needs and give farmers another option, another convenience, to potentially grow their markets.”

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Rebecca Ransom writes an article in the March 01, 2007 edition of the Litchfield County Times entitled, “Where Flowers and Beef Meet-a Slaughterhouse?”

LITCHFIELD-Eliot Wadsworth has an idea that might help slow the erosion of working farmland in the region, provide a valuable resource for those raising animals for the marketplace and help meet the growing demand for local meat products.

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Ken Simon, in his article posted on the Working the Land website entitled, “Is a Mobile Slaughterhouse Coming to Connecticut? Cutting-Edge Process Could Benefit State Farmers and Consumers,” refers to goals set out by the Washington State farmers who spearheaded the mobile slaughterhouse in their area as applicable in Connecticut:

A MOBILE SLAUGHTERHOUSE WILL …

  • Become less dependent on imported food.
  • Support a stronger local food system with a quality, safe and healthy product.
  • Help small and limited-resource producers to gain revenues and profits.
  • Make local food production a vital part of the food economy.
  • Create a direct link between consumers and Farmers
  • Increase opportunities for organic and naturally raised beef.

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Jane Morrigan posted a two-part article for the Organic Agriculture Centre of Canada wherein she describes the pros and cons of mobile abattoirs.1

Part 1 is entitled, “Will Mobile Abattoirs Help Small-Scale Livestock Farmers?”

Part 2 is entitled, “Mobile Abattoirs: Benefits and Challenges”

Her conclusions, while in a Canadian context, relate well to circumstances in Ohio:

The success or failure of a Canadian prototype of a mobile abattoir will be watched with interest by small-scale producers, ranchers in remote locations, game farm operators, and government agencies alike. Benefits must outweigh the cost of meeting stringent new food-safety standards. The success of such a venture will integrate producer/consumer demand, cooperation among stakeholders, entrepreneurship, innovation, political will and a supportive bureaucracy.

This is a great opportunity for government regulators and niche marketers of value-added meat products to develop a new model of cooperation and innovation. Training, licensing and monitoring of abattoir operators, internet-assisted inspection technologies and proactive practices such as BSE-testing every carcass could be incorporated into the model. A state-of-the-art, multi-species, multi-use mobile abattoir that is federally inspected offers the most flexible service to producers. At the same time, it ensures more uniformly applied sanitation standards to on-farm killing than exists today in Canada. In addition, it offers the most humane method of commercial slaughter.

Originally posted to Local Food Systems by Steve Bosserman on Sunday, April 13, 2008

  1. See also Jane Morrigan, Mobile abattoirs may help small-scale livestock farmers – Organic Matters, The Western Producer, January 27, 2005

Giving It Away, Making Money

The burgeoning “Internet Economy” is redefining operational assumptions and models for all organizations within the public and private sectors. This is particularly evident as free access to information increases and the clash between open source and proprietary development of software intensifies. But the transformation underway does not stop in the realm of bits and bytes; it is spilling into the traditional mainstays of agriculture and all types of industry and threatens to alter our most basic tenets of how to market, value, and receive compensation for our creativity, collaboration, and contribution. This posting explores some of the novel approaches underway in response to these changes and set the stage for viable business models in the near future.

The long tail of the Internet provides opportunities for individuals to post information, knowledge, experience, and insight from one location and reach potential audiences almost anywhere else in the world at any time. Countless millions of individuals, businesses, and organizations of all types use websites, wikis, blogs, etc. to do just that. Collectively, the number of intelligent insights and innovative ideas posted every minute is sufficient to change the world many times over.

Despite the countless, remarkable observations and viable solutions presented, it is difficult for all but a narrow slice of contributors to make a living from doing so via Internet media. Unless there is a subscription fee to the site, the content of postings is free to read. In many instances, incorporating or reproducing that content elsewhere only requires acknowledgement of the original contributor / author to do so.

Under these circumstances it is difficult to receive payment for the work itself. Instead, payment is made based on what else readers do in and around the material they are reading: how many embedded links they check in the posting, how many advertisers around the periphery of the posting do they visit, how many RSS feeds and email notifications to they elect to receive, to name a few.

Such are the metrics and dynamics of the “Internet economy”. In a October 22, 2007 PC World article by Len Rust entitled, “Web 2.0 Revives Internet Economy” states,

Revenue from the large range of content and services available from the Internet is rapidly increasing globally; travel, gambling, adult content, music and health services are particularly popular, and social networking services are flourishing. It is estimated that by 2010 more than US$2 billion will be spent on social network advertising in the US alone.

Information is power for those who have it when others don’t. When information is free, it is a great equalizer. This equalizing feature is changing the business models of corporations that made their fortunes from a portfolio of proprietary offerings, as suggested in the article, “Facing Free Software, Microsoft Looks to Yahoo“, by Matt Richtel in the February 9, 2008 edition of The New York Times:

Nearly a quarter-century ago, the mantra “information wants to be free” heralded an era in which news, entertainment and personal communications would flow at no charge over the Internet.

Now comes a new rallying cry: software wants to be free. Or, as the tech insiders say, it wants to be “zero dollar.”

A growing number of consumers are paying just that – nothing. This is the Internet’s latest phase: people using freely distributed applications, from e-mail and word processing programs to spreadsheets, games and financial management tools. They run on distant, massive and shared data centers, and users of the services pay with their attention to ads, not cash.

Such widespread distribution of free software—in many instances accompanied with open source code, as well (see essay entitled, “What is Open Source” in the first chapter of Open Source for the Enterprise by Dan Woods, a book featured on Tim O’Reilly’s website, Oreilly.com) —raises a basic question: where is money made in such an environment?

The sequence of diagrams that follow seeks to address this troublesome detail beginning with the first one below which plots options for ownership of software and availability of source code on axes of free versus paid and open versus closed.

The central dichotomy is from the bottom-left, where both the software and source code are given away, to the upper-right, where there is a charge for a software license and the source code is not available as depicted in the next diagram below:

Public sector / non-profit institutions are represented in the lower-left quadrant where the deliverable and how to make it are given away. The private sector / for-profit businesses of all types dominate the upper-right quadrant where the deliverable is sold and the intellectual property (IP) that defines its design and production method is tightly held. Within the very different realities at either end of this diagonal dichotomy, traditional administrative and business models have enjoyed a distinct separation of function, role, and design. However, the advent of the Internet economy has facilitated a steady migration and blending between the ends, opening the two adjacent quadrants for development of new administrative and business models.

As the Internet economy becomes more established, it is affecting all types of organizations. This is illustrated in the diagram below by the addition of a “Portfolio (What) – Practices (How) – Assets (With What)” triangle circumscribing the diagonal arrow. This triangle is positioned to emphasize that the WHAT and HOW of an organization are fluid on price and openness, but the investment in what it takes to do the WHAT and HOW must be exceeded by sales revenue, if a for-profit business, or matched by gifts and volunteer efforts if a non-profit entity. The consequence of not doing so is cessation of operation.

Looking specifically at a business that goes beyond software and source code to the design and manufacturing of tools, machines, and equipment systems, let’s consider something simple like a machine to mold compressed earth blocks (CEB). Advanced Earthen Construction Technologies, Inc. (AECT) offers several CEB machine models; the “Impact 2001A Series” can be towed, is hydraulically operated, powered by a 7 HP diesel engine, has the capacity to make approximately 300 blocks / hr . It is protected by U.S. patent, manufactured in Texas and can be shipped anywhere. Price for near-new is approximately $28,000. This is clearly in the upper-right quadrant. AECT’s goal is to set the price and control the IP such that their investment in assets (people, facilities, equipment, and operations) is covered and they are profitable over the long run.

An alternative is going to Marcin Jakubowski’s Factor E Farm project “the most important social experiment in the world” to emerge out of the Internet economy in the opinion of Michel Bauwens in this P2P Foundation posting. Marcin is working in parallel on a multitude of collaborative projects that when complete will provide a portfolio of products and services useful as a “civilization starter kit” for those who are committed to building a basic and robust infrastructure for a “Global Village“economy. One of these projects is a CEB machine formerly named “The Liberator“. Marcin estimates,

Parts for The Liberator as detailed below are approximately $1000. The machine will cost an estimated $3-5K, depending on manufacturing abilities.

Open source design is one of the main reasons why Marcin’s CEB machine is less expensive. As he states,

Here are the capitalization requirements for fabrication capacity. The Cost column reflects the price structure if off-the-shelf tools and materials – and proprietary development procedures – are utilized. This cost is conservative, as intellectual property costs are probably higher than the $10k that was specified. The alternative route, or the Open Source Cost, is that which utilizes open source know-how and is built on a land-based facility. The open source option means that certain equipment may be fabricated readily from available components when a design and bill of materials is available.

Obviously, Marcin has and continues to invest considerable personal resources into his “Factor E Farm”. What is the business model through which he makes money, or does he give it all away and ask for contributions?

In a Global Villages Yahoo! Group posting, Marcin explains it as follows:

…how do we get the work funded? The collaborative microfunding is perhaps the right idea. The Core Teams develop technical details. Then we fund prototypes, optimization, and the building of optimal production facilities. Why should low product cost be feasible? Because we have a lean operation with little overhead, and if funded, we have low-cost production capacity that can match even slave goods and mass production. The new economic age is here. We are not talking of many hundreds of thousands of capitalization requirements for similar enterprise. We are talking of open-source-fed production facilities that will cost on the order of $10k to build. There is cascading cost reduction, for example as we use our CEB to build the facility, or the solar turbine to power it.

As such, ‘capitalization costs’ are ‘zero’- fundraising covers the cost. So far, we’ve operated 100% on voluntary contributions. R&D costs are zero – they are distributed collaboratively. All the costs are zero zero zero, outside of materials and labor. We capture the value of labor – but even if we charge $100/hour for the CEB – with optimized fabrication time predicted to be 20 hours per machine – that is still $3500 for a machine – factor 8 lower than the competition, as you can check for yourself. That $100/hour is very well worth it – if it’s not being dissipated in wasteful production ergonomics and wasteful product design. Moreover, all proceeds are used to fund further open product development.

And that brings us to the diagram below which adds a boundary of “common value” in the foreground and another boundary for “differentiated value” in the background.

Marcin’s model illustrates how to strike the critical balance between giving it away and making money. As he mentions, the R&D costs for the CEB machine are zero because they are distributed collaboratively and the results are open source and freely accessible for all. This is anchoring against the “common value” boundary. Setting the price for the machine at $3700 covers the cost of materials and fabrication and if set at $5000 it generates a reasonable profit that can be reinvested or used as further compensation. When compared to $25000 for a competitive model from AECT, this clearly bumps up into the “differentiated value” boundary.

Marcin envisions using the Internet to widely disseminate information about the CEB machine, take orders, expand operations, offer training, initiate “open franchises”, distribute manufacturing capacity, and prompt further “localization“. These represent ways to play in the space between the boundaries where some activities are done for nothing and others garner compensation. It is that agility to remain pliable in the intervening space that IS the sound business model to stay on track. This is a lesson suitable for any business to consider.

Originally posted to New Media Explorer by Steve Bosserman on Saturday, February 9, 2008

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

A Voice for Localization

In response to my earlier posting about Localization, Bob Banner, publisher / editor of HopeDance sent me an email noting that Julian Darley was the founder and director of the Post Carbon Institute. While James Howard Kunstler was an Institute Fellow, he has his own website that covers a wide range of related topics. Please note that my 6 July posting is now updated to reflect this correction.

Bob also mentioned in his email that Issue 62 of Hope Dance Magazine 1 is “…a special issue we did on RELOCALIZATION that features BALLE, Judy Wicks, the PCI, Michael Shuman’s Small-Marts, Local Living Economies, Bill McKibben, many book ad film reviews, a LOCALIZATION FILM FESTIVAL and more.. all in a tabloid of 56 pages.” If you are interested in Localization, you will find this issue chock-full of useful information that can be quickly applied in a wide range of localities. Take a look!

In addition, he printed an extra 2,000 copies that are available in lots of 50 for $25, which includes shipping. If you be interested in hard copies for local distribution, please contact Bob and Hope Dance at this embedded link.

Originally posted to New Media Explorer by Steve Bosserman on Sunday, July 8, 2007

  1. No longer available online

The Case for Localization

Over the past five months I have dedicated considerable attention to “localization.” According to Wikipedia, “Localization may describe production of goods nearer to end users to reduce environmental and other external costs of globalization.”

The Relocalization Network, which is affiliated with Julian Darley’s Post Carbon Institute defines “relocalization” as “- a strategy to build societies based on the local production of food, energy and goods, and the local development of currency, governance and culture. The main goals of Relocalization are to increase community energy security, to strengthen local economies, and to dramatically improve environmental conditions and social equity.”

Another way to consider localization is to see it as the shrinkage of distance between the point of production and the point of utilization or consumption. It is the conversion of bits and bytes into material form as close as possible to where that form will be used. In contrast, globalization is the virtualization of experience, knowledge, and innovation so that intellectual property created can travel from anywhere to anywhere quickly, easily, at minimal cost.

Of course, one can look at the world today and effortlessly conclude that neither of these is current reality. We take advantage of low-cost skilled labor to manufacture in different countries only to move parts, components, modules, and whole goods vast distances to reach the place of final assembly or sale. Quite obviously, we produce far from the point of use in many instances.

So what will change this? It is a matter of impetus. Concern about continuation of the fossil fuel economy is one such prompt. There are those who support the contention that the fossil fuel economy is unsustainable due to depletion of reserves, especially oil. Still others claim that regardless of how much fossil fuel there is our consumption of it adversely impacts the environment resulting in severe consequences over time. And there are those who maintain that the political ramifications of buying fossil fuel from countries whose governments adhere to a different moral framework are not advantageous. These are certainly powerful factors directed toward changing current business models and social dynamics.

However, another deciding factor is technology and how people appropriate it. As technology continues to get smaller, faster, stronger, more embedded, and more intelligent it facilitates localization. At one time high capital investment costs and the resultant economies of scale prompted centralization and regionalization to amortize these investments. Now, rapid technological advances are placing increased integration, capability, and capacity in more compact and powerful packages. This scales the costs and complexities downward at a propitious rate. And it leads to very innovative applications that change how we live, what we do, and how we do it: iPhone , Cheetah Prostheses, and CEREC by Sirona.

Societies also change when their members are introduced to these technologies and latitude is given for people to experiment with them in their local context. Working with various technologies and their local applications increases the number of people who are “domain experts” in the solutions that arise. Such domain expertise accelerates the rate of application successes with local markets which sets up the possibility of exporting those solutions to markets elsewhere through a phenomenon called “innovation blowback“. But do those global enterprises want that? Sounds highly disruptive!

Here is where the interplay between globalization and localization can be discerned. The initial aim of globalization is to move technology to areas of the world that have a decided labor cost advantage and ship the goods produced or services provided back to the originating point of the technology. This offers a payback for the investment in the technology and provides an advantage until competition finds a location of similar or lower labor cost. As the competence, capability, and capacity increase in those countries that have been enrolled in globalization, their domain expertise about the products and services they are producing or providing increases stage by stage: parts, components, modules, systems, and whole goods. Ultimately, the originator seeks to establish markets and ramp up SALES of those products and services in low-cost countries. Their driving interest is to see that domain expertise continues to forge markets for native flagship products and services into non-native, new markets close to low-cost production and support operations. This means changing the practices and behaviors of people in low-cost markets. But do those governments want that? Sounds highly disruptive!

India and China represent two examples. Both have significant populations engaged in subsistence agriculture. Many of the world’s largest agricultural equipment manufacturers have production operations or are in the midst of setting them up in those countries. Of course, one of the main reason they went there at the outset was to tap sources of low-cost, skilled labor. Now, the next step in leveraging their investments is to establish local markets for the same or similarly scaled products as those that are successful in North American and European markets. That means introducing to India or China the kind of mechanized agricultural practices practical in two continents that have a combined population equal to India OR China is going to be exceedingly disruptive. The net result of mechanization on that scale is the elimination of the work people are doing with technology. Such unemployment forces people to move out of rural areas and into the urban centers for employment. Can the infrastructures of those urban centers and the surrounding environment sustain such an increase in population?

What kind of solutions would an India or China develop? Perhaps ones which are smaller, faster, stronger, more embedded, and more intelligent? In other words, the development IMPERATIVE of technology plays evenly across all countries, societies, and markets. HOW that imperative is exercised, though, is specific to the conditions within the local markets.

What if the domain expertise about those technologies feeding products and services going to North American and European markets was diverted to solutions for local markets? Would the solutions for an India and a China be different than what works so well in North America or Europe? Would those solutions not only have value locally, but also well-serve markets further from home? And of equal or even greater interest, what happens in the long run if countries like India or China perceive they are not being supported by corporate interests based in North America or Europe to develop locally-appropriate solutions which would clearly be in the best interests of those countries?

And these questions constitute a prompt to consider localization further in future posts…

Originally posted to New Media Explorer by Steve Bosserman on Friday, July 6, 2007 and updated on Sunday, July 8, 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

  1. Original link no longer available.
  2. Original link no longer available

Agriculture Megatrends: Ten Trends Redefining the Practice of Agriculture in the World

When I was growing up in south central Kansas, agriculture was a way of life – it was all around us in the form of wheat fields, cattle ranches, pastures, and gardens. Agriculture has had enormous economic significance throughout the history of Kansas, first, as a territory then a state. And it continues to be an important factor in shaping Kansas’ future. However, changing conditions over the past 60 years transformed the practice and scope of agriculture in Kansas: myriad family farms vanished through improved mechanization and consolidation of farming operations, absentee ownership of farms increased as farming businesses incorporated and adopted professional management in an effort to be competitive in a global market, significant tracts of productive farmland were lost to urbanization, and productivity of farmland became more unpredictable as precipitation patterns shifted, water tables dropped, and soil and ground water became more contaminated through unsustainable agricultural practices. While there are arguments both pro and con for the direction these changes took and their consequences, it is safe to say that agriculture is very different today than it was even a generation ago AND it will change even more with the next generation.

Changes in agriculture experienced by Kansans are not much different than those experienced by people in other states. The same phenomena of mechanization, consolidation, absentee ownership, globalization, urbanization, and non-sustainability have had similar affects throughout the United States and many other countries in the world. While the productivity / hectare or acre has certainly improved substantially over the last 60 years, the complications arising from less arable land, more distance from the point of production to the point of consumption, less oversight, and undesirable environmental consequences makes agriculture an even riskier endeavor than when success was determined by fickleness of the weather! If one extrapolates the next 20-30 years based on historical trend lines across the previous 60 years the picture for agriculture is not a particularly rosy one.

But just as mechanization had a profound disruptive effect on agriculture over 100 years ago, there are forces at play today and into the near future that are going to have a similar impact. My contention is that agriculture, rather than being relegated to the ranks of the mundane, mistreated, and maligned, will witness a rebirth into a new golden age. Whereas agriculture meant wheat, hay, and livestock when I was a boy growing up in Kansas, today, it extends across a full range of plant and animal applications: food for human consumption, feed for animal consumption, fuel, fiber, floriculture, horticulture, and nutraceuticals to name a few. This broader scope, when prompted by rapid and far-reaching developments in information and communication technologies and placed into the context of Marshal McLuhan’sglobal village“, opens the door to examine agriculture in a more approachable, personal, and wholistic manner. Agriculture is reinstated to a more historically accurate location – an explicit, integral part of our lives, individually and collectively, and our world.

The purpose of this posting is to introduce ten agriculture “megatrends” – to borrow from John Naisbitt’s 1988 book, MEGATRENDS: TEN NEW DIRECTIONS TRANSFORMING OUR LIVES – that portend a renaissance for agriculture. Together, these offer a framework within which further details will be added. For now, though, the highlights:

Agriculture Megatrends: Ten Trends Redefining the Practice of Agriculture in the World

1) Growing concerns about the depletion of fossil fuels, the environmental impact caused by consuming them, and the consequences of paying those who do not have the best interests of others at heart for the fossil fuels is contributing to an increased investment in bio-fuels, biomass, and bio-energy.

Renewable energy from plant material and animal waste will continue to be a high-growth area.

2) Modifying a crop portfolio to include more plant material for fuel rather than food or feed equates to less food and feed UNLESS more land is put into production and productivity and output per unit of land is increased to make up the difference. This means that land in urban and suburban areas formerly dedicated to non-edible, non-fuel uses such as lawns and landscaping will be converted into higher value uses.

Localization of agriculture will be a high-growth area.

3) Raising crops for food and feed or fuel and fiber requires more production with less cost on smaller land sizes. This leads to a continuing emphasis on genetics either by modification or selective breeding to make significant improvements.

Genetic research and applications of genetically modified or selected characteristics for valued crops will be a high-growth area.

4) Using seed stocks with uniquely valued characteristics warrant tight controls through growing, harvesting, and post-harvest handling to assure purity. This promotes the application of techniques like RFID tagging and tracking to maintain an audit trail of traits, conditions, and treatments from end-products to their source.

Traceability will be a high-growth area.

5) Knowing that fresh food is grown without the use of certain fertilizers, pesticide, and herbicide is of increasing importance to consumers. The classification of “organic” is gaining ground as a way to assure food is grown and prepared according to specific guidelines that preclude the use of these chemical applications.

Organic food production will continue to be a high-growth area.

6) Curbing the release of carbon into the atmosphere is complemented by absorbing it into plant material and converting it into sugar and starch through photosynthesis. As more countries adopt broad-based systems to manage carbon credits more interest will be shown in selecting crop portfolios that take advantage of carbon credits as well as other value.

Carbon sequestration will be a high-growth area.

7) Recycling water, waste, and unused raw materials is becoming a more important consideration to increase efficiency and prevent unnecessary losses. This leads to a more systematic integration of farming practices along with the management of waste and by-products. Such systems offer wholistic approaches to year-round food production in temperate regions with a minimum of energy consumption, maximum utilization of inputs, and reuse of unconsumed outputs.

Integrated farming and waste management systems will be a high-growth area.

8) Decentralizing the generation of electric power and making electricity the common energy source for the vast majority of people worldwide is a mounting imperative. This invites the possibility of those who live in yet-to-be-electrified rural areas of the world to generate electricity through wind, solar, methane, or geo-thermal and use that energy to meet the needs of their agricultural, business, and domestic operations self-sufficiently off the grid. The development of a full array of electric-powered equipment in all price ranges is a natural complement. Of course, as the grid reaches out to more remote locations it will be a straightforward way for those who are generating electricity by whatever means to sell their surplus and draw upon in times of peak usage.

Electrification of rural areas and agricultural and multi-use equipment, especially with VERY low-cost solutions, will be a high-growth area.

9) Increasing agricultural production in widespread areas as well as concentrating agricultural operations in urban, suburban, and near rural settings requires new ways of moving and storing the output from the point of production through processing and preparation stops along the way to the point of consumption. Issues of food security and food safety coupled with the management of inventory to assure the least amount of loss while delivering the highest degree of freshness and quality are critical. This applies to inputs as well as outputs and touches upon the coordination among diverse growers for individual production portfolios.

Agricultural logistics and complex production management will be a high-growth area.

10) Forming, utilizing, and managing connections between and among agricultural producers, suppliers, logisticians, and customers is essential for effective business relationships to develop and transactions to occur. Whether wirelessly or by landline by voice, written word, or graphics, there are many ways to communicate and transfer information. The most important step is having the information and communication infrastructure to reach anyone, anywhere at anytime so that knowledge and insight about markets, prices, costs, pick-ups, deliveries, funding options, investments, etc. can occur expeditiously and consistently.

Information and communication technologies will be a high-growth area.

While these megatrends are introduced individually, the reality is many of them work in concert with one another to form an infinite variety of complex solutions addressing a wide range of community and commercial opportunities. Future postings will not only elaborate on each trend, but will showcase those combinations that provide additional value through interconnection and integration. More to come…

Originally posted to New Media Explorer by Steve Bosserman on Thursday, February 1, 2007