Old cash register

Platforms – how to monetise a successful agri platform

How to monetise an agribusiness platform

 Over the past two blogs I’ve explained what a platform is, why they’re important for agribusinesses to understand, and how to begin designing a platform for your business.

However, you may have noticed a gap in our platform conversation. What is the business model? How do you profit off this? Once we’ve created this space for interaction and value-exchange – how do we get to share in this value?

At first glance, this seems like an easy question. Just charge the users of your platform! You’ve built the space – so it’s only fair for them to pay for it.

Unfortunately, it’s often not as easy as this. As I’ve explained – the value of a platform comes from the interaction between participants. The more producers and consumers on your platform offering a value exchange – the more valuable your platform is to them, and the more new participants will want to join.

If you decide to charge users to join your platform – you may instantly reduce the amount of participation on your platform. Which means the value of your platform will decrease – and this can lead to a spiral towards zero.

For an example of this – think of TradeMe or e-bay (popular trading platforms). TradeMe requires people listing items to sell, and people seeking to buy items. One without the other is a low-value proposition – you wouldn’t want to browse an empty platform, would you?

But if you charge users to join your platform from the outset, then this is exactly the dilemma you face. Creating a user fee limits the participation on your platform, which reduces the value of your platform.

Alternatively, you might consider building a platform for free – and then charging users once you have critical mass. Again – this approach rarely works in practice. People are not happy to pay for value they’re used to receiving for free, and usually vote with their feet.

You can now see why the authors of The Platform Revolution wrote, “Monetization, in fact, is one of the most difficult – and fascinating – issues that any platform company must address.”

The issue is the relationship between charge and participation. If you charge to access your platform, people will avoid your platform. If you charge for usage, this will likely reduce the frequency of participation. If you charge the producers – they will reduce the value they create, and if you charge the consumers, they will limit consumption.

The challenge is not insurmountable, but it does require careful thought. Your business model around your platform needs just as much strategic thought, trial, and design as the platform itself.

As you think about monetising your agri-business platform, there’s a few guiding principles helpful to keep in mind.

 

Keep thinking value

Remember – at the core of this platform is the creation of value. Any platform invites participants to join the platform, and then can explore ways to charge for the excess value that is created.

Before you know the excess value, it’s critical to understand the core value consumers and producers receive from their engagement with a platform. Broadly speaking, this can fall into four categories (as explained superbly by the authors of The Platform Revolution):

  1. Access to value created on the platform. The heartbeat behind any platform is providing value to consumers. This may be access to learning, data, expertise, services, goods – the list is near endless.
  2. Access to a market. The producers find any platform valuable as it allows them to access a market at scale. This may be access to farmers, farm-service providers, other businesses – whoever is seeking to use the value on the platform.
  3. Access to interaction facilitations. Platforms provide value to consumers and producers by allowing high-quality interaction for them. Instead of having to email back and forth, negotiate prices, engage in Zoom meetings and go through intermediaries – a platform allows direct exchange in a low-friction environment.
  4. Access to quality curation. Great platforms provide unique value by building curation systems that connect the right producers and consumers, at the right time. This reduces wasted time in searching the best fit, and allows for high-quality matches that meet customer needs, and producer offers.

 

When your platform does this well, you are creating excess value that a traditional pipeline business model cannot offer. That’s great! Most well-designed platforms actually create more value than they can capture, which is why free participants are happy to engage with the platform.

A solid monetisation strategy depends on thinking about each aspect of the above value your platform offers, and where you are creating excess value that can be monetised – without reducing the growth of your platform.

Monetise exchange, not use

One of the simplest – and most effective – ways to monetise a platform is to charge a transaction fee. This is sensible as the transaction between producer and consumer is the culmination of each of the sources of value.

Once the producer and consumer have agreed to participate in the exchange, your platform has delivered the promised value. If your platform facilitates the exchange of money, taking an agreed transaction fee is a solid monetisation strategy – especially if your platform caters to a high frequency of exchanges.

If you try to charge participants to use your platform, they are unlikely to explore the value possibilities your platform offers. They are taking a risk on your platform – choosing to pay before knowing what value they can receive. This strategy often limits growth and has been a death-knell to many platform start-ups.

If you take the advice of monetising the exchange, however, you are allowing participants to browse and explore your platform for free. They can experience the value of your platform, and it is only after the platform has delivered an excess of value that they are required to pay.

This approach de-risks the payment for both producer and consumer and makes your monetisation dependent on the performance of your platform. This is the approach used by many of the popular platforms in the world (Amazon, Uber, Airbnb) – and is worth considering.

 

Monetise access to producers if your platform is a community

An alternative strategy to carefully consider is monetise access to your platform to producers. This approach can work – but only if your platform has a wide-range of users who have joined to produce and share together. For example: this strategy would be suicide to a platform like Uber or Airbnb, which requires producers for the very success of the platform.

But think about LinkedIn, or any other platform where users both produce and consume value. On LinkedIn, users read posts and articles that are produced and shared by other users. You don’t go on LinkedIn to try and interact with specific sellers of services – you go to there to learn and connect with others.

However, LinkedIn represents a valuable market for another group – recruiters. As people don’t join the platform to meet with recruiters, LinkedIn have been able to charge recruiters and company an access fee to target individuals for potential jobs, which likewise encourages users to keep their profiles up to date.

Remember – this strategy only works if it has a positive effect on the network and encouraging growth and interaction. Applying this strategy to an auction or trading platform would not work – and would lead to a strong decrease in producer engagement.

 

Don’t monetise what used to be free

This is the golden rule of monetisation for platforms. Don’t charge any participant for value they are used to being free. People don’t like being told they now have to pay for a service they’ve enjoyed gratis. It’s an easy strategy – and one that usually doesn’t work.

Instead, strive to create new additional value that makes sense to charge for. Offer specialised curation, unique access, priority service – anything that allows the free model of your platform to continue growing – and direct participants towards the extra-value.

 

In summary

As you can see, monetisation is a huge challenge – but also a huge opportunity for strategic thinkers and for creating new revenue streams for your business. I recommend you plan your monetisation into the initial designs of your platform – rather than waiting until you have critical mass.

Although this plan may change, it is helpful to have a roadmap for monetisation as you design your platform, and allows you to prioritise build decisions, keep value-focused and seek to grow your platform in a sustainable and value-adding manner.

If you’d like to discuss more about the value of platforms, or chat about an idea for introducing a platform model into your business (remember – it’s not easy, but can be incredibly valuable!) – don’t hesitate to reach out!

I’m always happy to chat more about agribusiness, agritech, and improvements to business models and processes, and to share more about the work Rezare has done in this space. Just get in touch.

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International livestock data standard released

The ICAR Animal Data Exchange working group has released a set of JSON and API standards for livestock data exchange. The International Committee for Animal Recording is an international non-governmental organisation (NGO) that helps members and stakeholders share guidelines, best practices and standards in animal recording and production.

The culmination of around two years of work, the ADE-1 specification builds on previous work by the animal data exchange working group, including a previous XML standard. The new JSON and REST API specifications build on work done in this space by DataLinker in New Zealand and JoinData in The Netherlands.

I’m pleased and gratified to be one of the working group members, and to help lead the technical effort that has defined the new specifications, along with technical working group colleagues in Belgium, Finland, Ireland, Germany, New Zealand, The Netherlands, and the United States. I’m grateful for the support of DairyNZ, Beef+Lamb NZ, and the Red Meat Profit Partnership, through DataLinker, that has allowed us to participate, and for the recent involvement of a number of Australian organisations through MLA Integrity Systems Company. Your specifications and improvements are being submitted for inclusion in version 1.1!

There has been strong international support, with several animal recording and technology companies telling us they will use the specification (and indeed, some have already started implementation). Two recent webinars hosted by ICAR were attended by around 120 developers and product managers from a range of organisations.

The ADE-1 specification is released under the Apache 2.0 open source licence, and can be found in GitHub at https://github.com/adewg/ICAR

The working group is turning its attention to new messages and extensions for the next, 1.1 release. If you have suggestions or ideas, submit a suggestion to the issue register in GitHub, or get involved!

 

Will Covid-19 result in a shift in attitudes towards digital and data-driven tech?

Covid-19 and the lockdown restrictions have placed a lot of strain on us as a society and also required the adoption of new working practices and technologies.

 

Over the past three or four weeks, I’ve been interested by the number of times someone has said to me something along the lines of: “Well we are all going to have to get used to using tech like Zoom now aren’t we?”.

 

To paraphrase those conversations, what I’m hearing is that many people have started using digital communications technology much more than ever before, and in some case, for the first time.

 

Is this a sea change I ask myself? And if so, what might that mean for digital technology in agriculture?

 

At the top of this post is a video of a presentation I gave at the NFU conference in February 2019 – just over a year ago. How things have changed since then!

 

What is interesting is that I gave that presentation in the context of what I felt was some industry scepticism as to the value or need for all this much vaunted digi tech in ag. Now, having watched it again in the context of Covid-19, I find myself wondering if there has been (or we are in the midst of) a cultural shift in attitudes towards digital tech in ag, and in particular the role of data, and data sharing to help us address the productivity challenge we have in the UK.

 

If you’ve got 12 minutes to spare, have a watch and then ask yourself:

  1. How would I have felt about what was said in this presentation if I was hearing it a year ago?
  2. How do I feel about it now?

My hunch, is that your attitude will have shifted. Maybe not a lot. Or maybe a great deal.

 

As ever, interested to hear you thoughts. Feel free to post a comment at the bottom of this post.

Share your thoughts

Shopper looking at fruit

Platforms – what are the critical elements and how do I design one?

How do I design a platform?

Since writing the last blog  – the world has changed.

 

New Zealand is in level 3 of our lockdown, and thousands of businesses are adjusting to the new normal. Perhaps now, more than ever, the value of the platform is obvious.

A business modelled on the traditional pipeline is now seeking to understand how to continue their value-chain when key players are no longer mobile.

 

The platform models, however, are far more adaptive to change. Producers and consumers can continue to interact over platforms, and can quickly learn new best practices from one another. Platform owners can see – in real-time – changes to value creation and exchange, and share this knowledge with others.

And – given their inherent scalability – platform businesses can use opportunities such as this to grow to help share and add value to both producers and consumers.

So, if you’re still not clear on what a platform is – and why they’re important – you really should read the previous blog post here.

 

In this post, however, I want to share the critical elements any platform needs – and offer some guidance as to how you might begin thinking “platform-ly” about your business.

(Before we begin, I want to point out – although these fundamentals may seem basic, designing and delivering a successful platform is a very challenging undertaking. It requires a deep understanding of both producers and consumers in your industry, and a new recognition of value that the market is not offering in an efficient way. If you want to know more about how to begin understanding the minds and lives of your users – Rezare Systems specialises in user-experience research and training for the global agritech industry. Let’s chat.)

Refresher

As a quick refresher: a platform is a space (usually virtual) where users can interact and exchange information and a product. This could be exchanging a good for currency (like TradeMe or eBay) or content for engagement (like YouTube). Platforms are able to scale and expand rapidly, can unlock new sources of value and can adapt rapidly to changing situations.

It can be tempting at this stage to rush off and start sketching how your business can become a platform. Instead, I’d encourage you to consider the core question: what is the critical element at the heart of any platform?

Critical elements

The heart of any platform is interaction. It’s the exchange of value between the producers and consumers. It’s not the UI, it’s not the speed or scale of the platform – but it’s all about the interaction.

This explains why Craigslist – a platform that perpetually looks like it was designed at least 20 years ago – has flourished as a platform in the US. It does interaction well.

Any platform interaction involves three key components – participants, a unit of value and a filter. Let me explain:

  1. Participants: Any platform interaction needs at least two participants. The producer is the one who creates value (a Facebook post, an Airbnb listing, a new website plug-in, a tractor lease), and a consumer is someone who consumes value. Easy, right?

    But what makes a true platform unique is the ability for a producer to become a consumer (and vice-versa). A great platform allows both sides to swap roles, as needed. I can post content (produce) and watch content (consume). I can list a house on Airbnb (produce) and book a house on Airbnb (consume).

    For a smaller example – I can share information about my livestock, feed for sale, or crops, and can also access other farms; datasets.

    It is this ease of role-switch that allows a platform to grow rapidly. When a new participant joins the platform, they have the ability to grow both sides of the interaction.

  2. The unit of value is the next element of a platform: It’s important you’re clear on this one – as the unit of value is not the good or service itself, but the information about the good or service. This unit of value is what allows the user to decide if they want to go ahead to exchange their currency (whether money, time, information) to receive the final good or service.

    To put it simply – on a platform like eBay or TradeMe – the unit of value is not the second-hand electric guitar you’re hoping to buy. The unit of value is the listing of the second-hand electric guitar – that helps you decide if you want to proceed with the transaction.

    Value units are information, not physical products or real-life services. The value unit for Uber is the listing of available cars and drivers – not the actual driver and car itself.

    For your platform – the value unit is the information being offered by the producer to engage with the user. It’s the information that allows the user to decide whether to continue on with the transaction.

    How you choose to allow producers to communicate this unit of value is critical to your platform – and this doesn’t necessarily mean flashy images and designer fonts (again, see Craigslist). Or, think of the classified section of the newspaper.

    This cramped design allows the users to quickly scan hundreds of listings to identify which unit of value is the most relevant to them. It may not be pretty – but it has worked in the past.

    However, great platforms require a third feature to allow interactions – a filter.

  3. The filter is the way the platform delivers specific value units to specific customers. When a filter works well, users will only see units of value that are relevant and value-adding to them.

    A classified section of a newspaper uses a weak filter – organising value units by headings (e.g., Residential, Commercial, Situations Vacant). Readers can quickly scan the headings to decide which columns to scan – and then work their way down to find what they’re looking for. This is a weak filtering device.
    The advances in technology over the past two decades have allowed filters to mature through the use of software-based algorithms. Search bars allow users to search for relevant units of value to explore. Platforms learn users’ preferences and history, and then suggest new units of value to consider.

    Filters now can use a combination of location services (to filter units of value to those near you), social connections (to filter units of value based on what others like you engage with), seasonal needs (to filter units of value based on typical needs) and more to connect users with producers in the most valuable way possible.

Design steps

The critical elements of the platform are clear. You need to design for participants on both sides (producers and consumers), allowing flexibility for participants to change sides. There must be a way for units of value to be communicated, and an effective filter to ensure the users see the value they want (or need).

Once this has happened – the user can advance the exchange, allowing goods and services to swap for currency. The producer gets their value, the user gets their value – and the platform owner takes their slice of the pie.

So, when you are designing your platform – or at least, beginning to sketch out a platform possibility – here’s what you need to do:

  1. Determine your core interaction. What is the value exchange that will attract users to your platform in the first place? What need do users have, and what is the solution that a range of producers might be offering?

    Platforms live and die on this core interaction. If it does not represent real value to a user – no user will join your platform. If there’s no producers offering a solution – no producers will join your platform.

    So be razor clear – what is the value exchange you hope to facilitate through your platform?

  2. Define the participants. Based on your core interaction – who will the key participants be? Again – be clear with this. Don’t just say – “Farmers”. What type of farmer will need this value? When do they need this value? How valuable is this to them? Do they know they need this?

    This is similar for the producers. Who are the producers – and why would they be willing to provide value for the end user? How easy is it for a producer to also be a consumer?

  3. Define the unit of value. This is tricky – and usually takes a team and time! What is the critical information your core interaction requires? What is it that your users need to see to determine the value to them? What is it that your producers are able to offer to communicate their value? How can this be done in a quick yet effective way? You may need to do some customer empathy work to discover this.
  4. Determine your filter needs. This is the final stage of design for a platform, and one that requires careful thought. What information will you ask your users to provide, to give them the best interactions? What data can you utilise to aid effective and valuable interactions?

 

This is not a five-minute exercise, but requires careful thought, communication with the team and early-stage validation testing with possible users and producers. Designing a platform well – and prototyping this design at the concept stage – is a critical step to avoid wasted investment in a platform that users don’t want, or producers do not find valuable.

Rezare Systems has a strong history in helping businesses – both big and small – think through their offering, build quick wireframes to test, and prototyping this with real-users. If you’d like to chat more about your value offering and how this might fit as a platform – please reach out.

In the next post we’ll talk about how to make profit from your platform – which is not as easy as it sounds! Till then, get sketching and get designing!

Useful, inspiring? Questions? Let us know.

 

People in front of a laptop

Designing agritech together

The background

This workshop was originally intended to be delivered interactively at the MobileTECH.Ag conference. Despite switching to digital, we had great participation and a surprisingly interactive experience. We hope you enjoyed it. Thanks to Jeremy Suisted and Andrew Cooke for presenting.

Next steps

If you enjoyed this video and want to share some of your feedback with us, or were inspired to learn more or try this in your agricultural business, please let us know.

If you have questions or would like to learn more, including a short free consultation about your idea or challenge, please get in touch.

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