Business Models in Agriculture — The Case of a Water Bamboo Farm
Minju Yang（China Productivity Center Agriculture Innovation Department）
1. Innovations of agricultural business models
Modern agricultural management has transformed from a first-level industry to a sixth-level industry, and practitioners have turned from simple farmers to expert farm managers. Their expertise includes not only producing amazing crops, but also diversifying the marketing channels, managing customer relationships, applying e-commerce and data management applications, etc. These all determine the profit making and customer maintenance. The blooming trends now are eliminating the industrial value chains and the intermediate links for sake of increasing added values, and pursuing cross-domain integration. Farmers need to form production and marketing teams for corporate operation in order to meet the challenges of the new era. Business model innovation, therefore, has become an important tool that agricultural organizations must master.
The CPC business innovation system (CBIS) is a structured procedural development system for all industries to use an operable logic. Every step in the procedure has forward and backward movements available for the users to make decisions when the environment changes. The system is focused on the core of design thinking and adopts instruments like user research and destructive business model innovation to help the enterprises explore innovation opportunities from the industrial environment and corporate competence, and identify the jobs to be done (JTBD) as the basis for the development of new products and services. New business models are then developed by taking into account the customer value proposition (CVP), key resources and processes, and the profit models.
All innovations come from assumptions. This is something that is often overlooked. The sketch of business model innovation is mistaken as the achievement of a great innovative enterprise. As a matter of fact, this is just the start of a road full of challenges. The following are some short-term suggestions based on practical experience to enterprise operators when faced with changes of business models.
2. Background of the case farm
The case farm is located in Puli. There are several major water bamboo growing areas in Taiwan, namely Puli in Nantou, Jiaoxi in Yilan, and Sanzhi in New Taipei. Nicknamed as "legs of the beauty", water bamboos can be a delicacy because of the special water quality and climatic conditions. Puli is in the mountain area with good water and environment conditions and is known as the “hometown of water bamboos", accounting for over 90% of the production in Taiwan. The harvesting period is long because of the cool temperature and clean water sources. So seasonal leisure farming activities can be arranged all year round. The farm owner has actively invested in the cultural and creative products and in the local whitefish restoration projects to further promote environmentally friendly farming. It has also entered into a marketing contract with the Tse-Xin Organic Agriculture Foundation as a responsible social enterprise. Creative products developed by skillful local craftsmen, including beverage coasters, waving fans, flower baskets, sunshade hats, etc. made with woven water bamboo leaves, have opened up infinite business opportunities with the local cultural features.
The main business items of the farm include water bamboo pickles, working holiday programs, DIY handicraft production, organic fresh water bamboos, whitefish restoration eco tours, and customized 3D rural experience programs. Customers are mainly family groups and college students who receive information about the farm through Facebook fan groups and text messages.
3. Problem Analysis and Suggestions
(1) Problem Analysis
Through the consultants' on-site visit and diagnosis, three problems are revealed:
The content of farm experience activities is rich, ranging from the primary to the tertiary industries, including those of 1-DAY farmers, 1-DAY chefs, DIY pickles, etc. The demand of individual customers, however, is not stable. Customer revisit rate is low, and the revenue is unstable.
Green conservation requires a lot of manpower. The lack of on-site labor makes it difficult to maintain the quality of the environment and tour programs.
The configuration of the venue is messy and is easy to leave the customers with bad impressions.
(2) Diagnosis and short-term suggestions
The farm owner is aware of the hard job of operation. With the help of the consultants, the external factors are collected and analyzed to help identify new opportunities from the political, economic, social, technological and environmental aspects. The most influential problem is the unstable flow of people. Tourists concentrate on holidays. STP is used to find that the main customer groups are families and students.
The key resources and key activities for the above two groups of customers need to be identified. 3D experience can be an important activity for families. Working holiday programs can attract student groups, but this would require the classic courtyard house as the key resource.
On-site visits and observation and an analysis of the past experience of customer reception have indicated that the corporate client is a promising potential market. However, the value orientation of the corporate client is different from that of the families and average students, with more weight on environmental education and social responsibilities. For the key resources, the reform should start with optimizing the website and enriching the content of the guide services, to clearly lay out the services provided by the farm. For the key activities, adjustment can be made on the guide content of whitefish restoration projects, agricultural assistance experience, food and farming education, and ecological education. In addition, in order to enhance the confidence of the corporate customers, what need to be taken into account are the attitudes of stakeholders who may affect decision-making, such as: NGO foundations on green conservation, Ecological Education Foundation, CSR Foundations, Managers Association, etc.
In response to the above needs, the customer value proposition map is used for passing on and obtaining values. For example: contact with corporate customers is established through lecture activities, websites, and TV media. Profit is increased through tour packages, souvenir products, and water bamboo field adoption programs.
With the customer value proposition identified, the whole process of customers’ visit, from familiarization till the end of the trip, is reviewed to locate the contact points with the customers and the activities at each stage as the basis of design for future action plans, for instance, various guide plans, environmental education certification, updating the fan clubs, display of achievements in agricultural assistance, and updating the progress of whitefish restoration. Among them, the whitefish restoration lecture plan is of more importance, because from the website search engine, it is found that the whitefish restoration topic has high visibility, ideal for customers to locate the Farm.
Through on-site visits and observation of the interaction between the guides and the customers, some immediate improvement without too much cost is identified. The layout of equipment in the restaurant and the kitchen can be rearranged. Tables and chairs with a long history in the farm can be put together in the same area to add a retro rural atmosphere.
4. Future business model planning
(1) Changes in value propositions affect resource allocation
The value proposition of the new business model is to plan green conservation, environmental education, and social responsibility activities and resources aimed at target customers. Besides TV, lectures can be a main channel to make the farm better known. This may not mean much difference in terms of the cost and revenue, with the exception of the increased revenue from adoption of the water bamboo fields. To strengthen the trust of the customers, cooperation projects with the Green Conservation Foundation and social enterprise platforms, such as lectures, are recommended.
(2) Focus of thinking on future changes
The farm owner should learn and understand the use of the CBIS. By understanding the customers through the service procedures, the necessary action plans can be developed for the farm and summarized as key resources or key activities.
Business models may be similar with corporate customers and individual customers, such as in the cost structures. The models can also be different between these two groups, as in key activities and key resources.
The need for corporate customers is of a longer term, so more consideration should be on the continued concern of the corporate customers on the farm and the entire community.