We have been talking a lot in recent months about the way software is eating the world.
Now the concept is getting more literal. At a recent conference, a Microsoft executive announced that engineers in his unit were working with farmers to digitally transform the way butter is made.
Think about it. People have been churning out butter the same way for 4,500 years. Nobody complained. Yet one day engineers pointed out to Land O’Lakes, the Minneapolis dairy co-op, that it was sitting on a massive storehouse of data and that they could access almost unlimited compute power through the cloud to figure out what it meant. So together they reimagined the entire process.
This is a recurring theme in the new Gilded Age. Businesses are freshly empowered by cheap access to tremendous computing power, and they are using it to animate vast amounts of data that they used to throw away. As they fine-tune their approach, they are revitalizing existing projects and forging profitable new ones.
In the case of Land O’Lakes, the process involved analysis of data produced by satellite imagery, precision agriculture and programmable semi-autonomous tractors. The result was a fantastic increase in productivity. The Wall Street Journal reports crop yields jumped in many cases from 100-130 bushels per acre of corn to 500-plus bushels.
“Every business leader today is thinking about how they’re going to transform products and services,” said Judson Althoff, an executive vice president at Microsoft.
In agriculture, the stakes are high. Goldman Sachs expects the world population to rise 35% by 2050 as diseases are conquered. Meanwhile, changes in climate have put arable land at a premium.
“As the population continues to grow without a comparable increase in farmable land, the world has once again reached a tipping point in its long-term food-supply problem,” said Jerry Revich, an analyst at Goldman Sachs Research in a video presentation.
He continues: “The next leg of food-production growth will come from greater precision in agriculture, with advances in hardware, software and computing power converging with technologies like self-driving tractors and drones to help farmers feed humanity’s next century.”
|Currently, farmers spend an inordinate amount of time in their fields, painstakingly looking for crop damage.|
Smaller, lighter fleets of autonomous tractors equipped with satellite feeds and sensors would reduce human labor costs and soil compacting. Less-dense soil takes seeds better and is more fertile. Labor-cost reductions sink straight to the bottom line.
Sentera, a Minneapolis-based startup, is building agricultural sensors that attach to off-the-shelf DJI-made drones. They will collect and interpret TrueNDVI crop-health data in real time.
NDVI stands for Normalized Difference Vegetation Index. It creates a graphic representation of data about the fields, including mapping the green and not-so-green vegetation.
Currently, farmers spend an inordinate amount of time in their fields, painstakingly looking for crop damage.
In the new Gilded Age, these problems and others are solvable. The era will create new winners that most investors will miss. That’s because they’re looking in the wrong places.
It’s not just about the technology providers. The tech is just a tool. When companies move from producing information technology to consuming it, they are set free of old business models. They become more productive, and shareholders are rewarded with higher stock prices.
Now it’s up to us to find passed-over, old-economy companies like Deere (DE), that have the scale and foresight to take advantage of these insights.