4 Lessons From Land O’Lakes on Building a Digital Ecosystem

In short:

• Building a digital ecosystem contributes to growth and profits that far exceed industry averages. 
• However, 85% of ecosystems fail within three to seven years of launch.
• Land O’Lakes' four-step strategic approach can help you chart your initiatives — and reap the rewards. 

Companies that succeed in building a digital ecosystem enjoy exponential growth and profits — 27% to 32% higher than industry averages. The largest enterprises in the world have already tapped into this power. Yet, 85% of ecosystems fail within three to seven years of launch.

Executive leaders struggle to grow and sustain ecosystems because they don’t understand the management practices needed to secure initial investments or attract, motivate and empower participants. Organizations that want to get in the game and avoid the pitfalls can look to the experience of Land O’Lakes.

Download now: How Digital Ecosystems Drive Growth and Expansion for Tech CEOs

To help 3,000 farmers and over 90 agricultural retailers bring their management practices into the digital era, Land O’Lakes connected them with Microsoft and agriculture technology (agtech) companies, including John Deere and Bayer, in an ecosystem. In 2020, that ecosystem led to $2.3 billion in topline sales for Land O’Lakes, a $15 billion agricultural cooperative, headquartered in Arden Hills, Minnesota, U.S.

To achieve that level of growth, Land O'Lakes' chief technology officer (CTO) had to help other executive leaders at the company embrace new ways of motivating, supporting and managing ecosystem participants.

Four lessons from Land O’Lakes’ success can help others chart their own initiatives.

No. 1: Win Internal Support by Illustrating the Cost Savings Opportunity

The hype and jargon surrounding ecosystems can create skepticism, even among leaders who understand the value of digital initiatives. To cut through doubt, the CTO had to persuade fellow Land O’Lakes executives of a benefit they could easily understand: cost efficiency.

To explain how existing investments in digital solutions weren’t effectively solving farmers’ problems, the CTO depicted the uncertainties and complexities Land O’Lakes farmers faced in the journey from planting crops to selling them.

And, to counter questions of why Land O’Lakes couldn’t gradually solve farmers’ problems by itself, the CTO enlisted finance, strategy and farmer representatives. This group used the challenges, historical data and competitor analysis to figure out the costs of building solutions alone — nearly $2 billion annually — versus bringing together a network of partners — a more realistic $40 to $45 million per year.

Watch our experts: 3 Key Actions for CIOs to Unleash the Potential of Digital Ecosystems

No. 2: Create Participant Use Cases to Show How the Ecosystem Works

To validate that the ecosystem would work, the CTO built illustrative use cases detailing which solution, capability or data each partner would provide to whom and why. For instance, farmers agree to share field, crop and weather data from their sensors and drones in exchange for tailored yield management insights from Land O’Lakes and partners.

To access these customers and their information, independent agtech companies agree to share their own data with Land O’Lakes, give exclusive access to proprietary AI models and sell products at discounted rates within the ecosystem. Land O’Lakes then uses this data to create new products and revenue streams, such as carbon credits — measurable CO2 savings from new farming practices, which can be sold as offsets to other companies.

Companies often miss this step, which is critical for verifying your ecosystem strategy. These use cases inform decisions about how to attract participants and regulate interactions as well as the functionalities that ecosystem platforms must offer.

Learn more: Your Ultimate Guide to Supply Chain Management

No. 3: Win External Support by Organizing Around Shared Outcomes

The CTO worked with other executives at Land O’Lakes to create and publicize an outcomes oriented vision for the ecosystem. He also got input from leaders at other agtech companies. The shared vision would help elevate the scope of the ecosystem beyond individual goals, building a sense of collective ownership and alignment among otherwise independent entities. The process led to this vision statement: Farmers, retailers, food companies and technology providers unite to “create sustainable food, fiber and fuel supply chains that are powered by data-driven insights and digital solutions."

At the same time, sales and marketing at Land O’Lakes identified benefits that would attract farmers, agtech partners and food companies, developing campaigns around those perks. Campaigns start with the vision, and emphasize the unique benefits of creating and exchanging products within the ecosystem. For instance, niche technology startups can leverage Land O’Lakes’ long-standing customer relationships to grow quickly and efficiently without giving up control of their intellectual property.

Finally, Land O’Lakes designed partnership agreements to reinforce joint accountability for shared strategic outcomes, instead of service levels or goods sold. The company:

• Guarantees farmers a percentage increase on yield if they join the ecosystem, a radical shift from promising product quality and performance
• Offers industry expertise and customer insight to help Microsoft and agtech partners fuel new product development

No. 4: Give Training and Tools to Participants So They Can Create Solutions Together

The Land O’Lakes ecosystem only works if the farmers, agricultural retailers and agtech companies can create solutions in partnership with one another in an easy and secure fashion. Farmers and retailers customize applications, analytics dashboards and smart farming equipment from multiple providers to:

• Predict how weather and soil conditions will affect their yield.
• Automate crop planting and fertilization tasks.
• Share field data with one another to improve yield insights.

Agtech providers build applications and smart farming equipment for farmers and retailers to use and customize, independently or with developers from other companies.

Land O’Lakes leaders put in place a temporary cross-functional team — drawing on IT, digital product development and agronomy experts — to help farmers craft their own digital business strategy and learn the skills necessary to execute on it, such as selecting and connecting digital solutions from ecosystem partners. The team also teaches Land O’Lakes’ sales staff how to use ecosystem platforms and tools, effectively transforming the sales and customer support functions into technology managers.

Other companies in the ecosystem may have the skills needed to create solutions together but must make sure the resulting products are compatible and secure. For these partners, Land O’Lakes built open development platforms, or “digital foundations." An agtech platform team, reporting to Land O’Lakes’ CIO, creates industry-specific modules, such as APIs to access farm data and design guidelines for a consistent user experience in the ecosystem. A team from Microsoft provides more standard application development tools, such as code editors, debugging devices and reusable code snippets.

This article originally appeared in Gartner Business Quarterly in Q3 2021. Download the full issue here.