Is irrigation tech the bellwether to the emergent servicisation phenomenon unfolding in the global agribusiness industry - whether through leasing, usage-based models, or irrigation hardware equipment-as-a-service or more broadly Irrigation as-a-service and Farming-as-a-service?
Few weeks ago, along with ABM member Reshmi Vasudevan joining us, I organized the “State of Irrigation Tech” ABM Townhall (manel to be precise, my apologies!!) with four amazing founders working on diverse product/service models connected with Irrigation Tech - Solarisation-as-a-Service, Sensing Automation and Intelligence, Water and Fertilizer Management and Irrigation-as-a-Service respectively.
1) Amit Saraogi, Co-Founder Oorja Development Solutions Limited
2) Naveen Singh, Co-Founder PhyFarm, AI-enabled Agri-IOT Platform
3) Jasveer Singh, Founder and CEO, SICCA Automation
4) Srinivas Malladi, Founder and CEO, AgriRain Agro Industries Pvt. Ltd.
After talking with these founders, I discovered few fascinating insights that could sum up the real challenges that bedevil this sector and the possibilities that await us when we discover the best wrapper business model that will unlock the benefits of irrigation technology to smallholder farmers.
With the pernicious effects of Climate change rubbing on our noses and the advent of servicisation phenomenon at play, farmers might never fully irrigate their farms again. Given the irrigation tech trends we are seeing via groundwater accelerating water scarcity, supplemental irrigation with dynamic pricing (based on piping infrastructure) could very well become the norm. We are essentially talking of irrigation tech that sufficiently address goldilocks dilemma (neither too much, nor too little) and is mindful of Jevons’ paradox
Crop selection depends on neighbors. Fertilizer selection depends on the neighboring fertilizer shopkeeper. Irrigation depends on convenience.
Farmers know that they can’t do farming without water and are equally aware that it is not going to add to the income. If you are an entrepreneur, how do you solve for this problem?
Early adoption starts from high-value crops - grapes, pomegranates, greenhouse cultivation, followed by commodity crops - cotton, sugarcane and corn. There is plenty of room for building the BMW and bullock cart for irrigation tech.
Business model innovation is not just about machine-use efficiency and figuring the payable atomic unit that could be monetized. It is also a technology problem. And adding more technology doesn’t improve adoption one bit.
The bulk of Irrigation costs boil down to fuel costs and moving the equipment from Point-A to Point-B. You either move irrigation equipment around or build a larger pump at downstream end that makes it a distribution problem - How far can you distribute the water through a shared infrastructure?
The Pareto’s Rule of Irrigation Tech - Product-driven irrigation tech is valuable for the creamy layer of the top 20% of the market. The remaining 80% of the market depends on service-driven irrigation tech.
Why is Irrigation Tech in smallholding countries a no-go-zone for venture capital activity? Domestic Investors don’t want to bet on models that unlock existing technologies. They don’t want asset heavy models. The tides are slowly changing though. Besides climate finance and transition finance and philanthropic capital, institutional investors are now starting to bet on irrigation technologies and other decentralized renewable energies infrastructure.
Transferring Ownership is a key ingredient for scalability in smallholding irrigation tech contexts. Preferably within 3-5 years so that irrigation equipments have 10-15 years of good, useful life behind them. With agribusiness partnerships, such models can unlock impact for smallholder farmers.
It helps to solve smallholding farmer livelihood and managing water as two separate problems and tackle them one at a time.
Technology trade-off in irrigation tech boils down to stripping down the technology to its least common denominator at the customer end and cutting down the overhead costs.
Solving for Irrigation Tech is a question of timing - How do you manage the window of opportunity for the 15 days when they have a predictable water source?
Solving for Irrigation Tech is a question of understanding hydrological behaviour - how do you build the infrastructure that underpins irrigation and design technology in which the value of technology outweighs the infrastructure?
Solving Irrigation Tech in rainfed regions is a double whammy problem solving for lowest affordability rates, poor infrastructure, cropping patterns to arrive at a bottom line that provides livelihood to farmers. Formal water markets possibilities emerge when you understand the combinatorial forces of innovation at play.
The biggest challenge in building water credits, water markets and building underlying infrastructure is that nothing is formal in a village economy. Building appropriate social technologies with the right set of incentives could bring a shift.
Discovering the sweet spot between tech and impact in irrigation tech often lies in stripping technology at customer end and ramping technology at the back end.
Irrigation tech costs are currently computed by computing the cost of electricity as opposed to measuring how much each farmer is using the water. Subsidies don’t help either.
R3.0 is doing interesting work on this domain that is worth checking out
I loved this dialogue for the deep candor the founders shared in tackling such a fiendishly complex problem. I hope you enjoy the conversation as much as I did:)
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State of Irrigation Tech