Getting Ag Tech and Innovations Into New Hands: Commercial Pathways to Scale and Sustainability
What’s the Donor Role?
We’re wrapping up our first year of implementation of the U.S. Government’s Global Food Security Strategy through Feed the Future, which was submitted to Congress in September 2016. We’ve strengthened our approach to market systems, doubled down on nutrition and added resilience as a topline goal, and we will continue to emphasize sustainability in all of our work. Our new emphasis on inclusive and sustainable agriculture-led economic growth brings into sharp focus the role of partnering with the private sector and commercial pathways to reduce global hunger, malnutrition and poverty. The new strategy provides this mandate on sustainability and scaling:
“Inclusive and sustainable agriculture-led growth requires widespread adoption of improved technologies and practices by value chain stakeholders… In most cases, scaling requires promoting the diffusion of adoption beyond direct beneficiaries of development interventions. We will do this by working with delivery pathways (public and private) to demonstrate value and make technologies available to relevant value chain stakeholders, including service providers, input suppliers, smallholder producers and processors.” (U.S. Global Food Security Strategy, p.12)
So, How Do We Get There?
We’ve learned a lot. Much of our experience to date focuses on seed systems scaling, agribusiness enabling environment improvements, firm-level partnerships for market entry of new technologies, working on country-level to create and implement scaling strategies for promising innovations, and so much more!
Part of our scaling approach is reaching beyond direct beneficiaries to achieve sustainable and scalable results. For consumer products, the “sixteen percent rule” suggests that when one in six consumers uses a product it catches on and goes viral. With smallholder farmers, we find that the ratio is in the neighborhood of one in four or one in three to reach takeoff. One of our roles is to help firms reach that critical mass of early adopters so that indirect smallholder beneficiaries take up the technology.
Partnering with the private sector and working through commercial pathways are key to reaching this scale, as private sector firms are the input suppliers, service providers, traders, buyers/processors/retailers in local and global agriculture markets. When a private company is successful and selling (earning profit), it’s in their interest to grow their customer/client base and therefore provide more and more producers, processors and consumers with access to goods and services. When this product or technology also makes agriculture production more efficient and products more nutritious, the development impact is improved food security, farmer income and better nutrition. Through the commercial pathway to scale and targeted partnerships, we’re facilitating the alignment of development impact and business interests.
The Feed the Future November 2016 newsletter highlights one of Feed the Future’s commercial partners, Universal Industries, in Malawi. This for-profit, privately-owned company’s growth strategy contributes to scaling the availability of sweet potatoes. And not just any sweet potatoes but orange-fleshed sweet potatoes developed by the International Potato Center, which are rich in beta-carotene and easily converted to vitamin A in the body. Universal plans to procure these sweet potatoes from smallholder farmers. Through this commercial demand, production will increase, so both rural households and for profit processing plants will have access to these nutrition rich sweet potatoes. For more on Universal Industries, see here.
What Have We Learned So Far?
Under the last few years of Feed the Future, USAID has been analyzing what works and what doesn’t in scaling. USAID recently funded a series of five case studies to assess the key drivers of successful scaling of pro-poor agricultural innovations through commercial pathways.
These five case studies include 1) hybrid maize in Zambia, 2) irrigated rice in Senegal, 3) Purdue Improved Crop Storage (PICS) bags in Kenya, 4) agricultural machinery services in Bangladesh, and 5) Kuroiler chickens in Uganda. A summary of the case studies can be found in the cross country synthesis report.
Some of the most important implications of these case studies are:
- The fewer the number of components in the package and the simpler it is, the easier it is to approach comprehensive adoption and realize the full benefits of the innovation for adopters at scale. Innovations that require substantial training and extension support tend to be less robust, and providing essential support can be challenging for commercial partners from a business perspective. Indirect adopters are also likely to experience less than full impact.
- Innovation packages in which the core technology upgrades, replaces or leverages existing ones are more viable for adoption and scaling. This was the case in Zambia, where many farmers already had familiarity with hybrid maize because many had used it in the 1980s, and in Bangladesh, where farmers already used diesel-powered engines for their pumps and more easily adopted the more efficient axial flow pumps.
- Innovations that address a clear need and have tangible and visible non-financial benefits, such as savings in time, labor or cash flow are more likely to successfully scale. Purdue Improved Crop Storage (PICS) bags in Kenya and elsewhere largely eliminate postharvest losses, and in Southwest Bangladesh, most of the new machinery helped save on acute labor shortages that farmers experienced during land preparation, planting and harvesting.
- The price point of the innovation affects affordability for potential adopters, which is critical to successful scaling up since many potential adopters — especially small farmers — face cash and credit constraints. Even with a high return on investment, innovation packages with high costs, relative to income and wealth, are difficult to scale. In Bangladesh, for example, machines were offered at multiple price points and the less expensive ones were easier to scale even though they had lower returns. This was because farmers could pay for them from existing resources or could borrow from family members, and there was also less risk involved. Innovations that can be tried in small amounts imply less risk and more affordability.
- Strong financial benefits in terms of returns and especially low or decreased risk are essential for successful scaling up. An important source of risk reduction is diversification across crops, time and space (i.e., innovations that can be used for multiple crops or seasons). In Senegal, the introduction of government-subsidized crop insurance was part of the innovation package for high-yielding rice and reduced the risk of production loans for both farmers and lenders. In Zambia, the large number of hybrid varieties in the maize seed package allowed farmers with sufficient land to plant two or three varieties with different risk-return profiles relative to rainfall patterns, de facto using a portfolio approach of varieties based on diversification.
As Feed the Future continues to invest and identify agriculture technologies and innovation, let’s consider the commercial pathway for dissemination and scale early on in the research and development process. Agriculture research entities may connect earlier with food processors and other private sector firms to understand commercial demand for their products. In this way we can reach the most number of people for the greatest impact on food security.
For some innovations, there is not a clear, commercial pathway to scale. For these innovations, Feed the Future is investigating whether and how public private partnerships can facilitate technology uptake, either by alleviating supply constraints or addressing demand constraints. Through several partnerships we are testing possible models.
Keep your eyes out for a new study on Research and Commercialization by Feed the Future Partnering for Innovation to be posted on Agrilinks later in 2017.
Aviva Kutnick is a USAID Foreign Service Officer currently at headquarters specializing in private partnership development to get agriculture technology and innovations into the hands of and to benefit small-scale farmers, traders and food processors. Mark Huisenga is a Senior Program Manager specializing in agriculture investment due diligence for commercializing and scaling innovations. Both Aviva and Mark work in the Bureau for Food Security’s Market and Partnership Innovations Office supporting Mission programming and liaising with private sector companies in the agro-food sector. USAID is the lead agency implementing Feed the Future, working together with its partners to build a world free from hunger, poverty and undernutrition.