Business nous an essential skill for future ag industry success and prosperity

Business nous an essential skill for future agribusiness success and prosperity

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These days, it is not enough for our farmers to know their product and industry inside and out. To continue to grow and flourish in the Australian agribusiness environment of the future, they also need to be savvy, forward-thinking, and innovative businesspeople.

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These days, it is not enough for our farmers to know their product and industry inside and out. To continue to grow and flourish in the Australian agribusiness environment of the future, they also need to be savvy, forward-thinking, and innovative businesspeople.

According to a new whitepaper from the Queensland University of Technology, The Agribusiness Sector in Australia, the outlook for the sector remains very strong, with indications that the Australian agriculture industry is firmly placed to weather the global downturn from the coronavirus pandemic better than other sectors and countries.

Author of the report, Business Strategist Dr Antony Peloso, says the agribusiness sector is one of the best placed in Australia for the longer term, as a result of the robust foundations of the industry that has resilience and innovation at its core.

However, he says that with the changing nature of the sector and with increasing corporatisation and vertical integration, there is increasing need for small enterprises and family-run agribusinesses to adopt more sophisticated business models to better position themselves to take advantage of future opportunities.

"Australian producers and their products have long had powerful brand recognition in the domestic and international marketplace. Overall, Australian producers are known for quality and have outstanding reputations. And, there is the ongoing perception that Australia is a generous and consistent food bowl," Dr Peloso said.

"The logistics and supply chain in the market are excellent. Our producers have long been exposed to global competition, which means they have had to fight for share, and this makes them resilient and market-focused. It also means that they have learned to be flexible as market forces change.

"Compared to other producing countries, Australian producers also have a reputation for adopting technological solutions, and studies show that we have an entrepreneurial ecosystem that fosters a culture of innovation.

"However, the sector is becoming more corporate and vertically integrated. This might be good for the market overall. But how will our smaller and often family agribusinesses thrive in this environment into the future?

"Australian agribusinesses already have the reputation, quality and flexibility. To continue to grow they need to increasingly also look at more sophisticated business models. They must leverage that entrepreneurial ecosystem, plugging into efficiencies of the supply chain, work to build brands, and seek ways of improving through ground-breaking innovation.

"They know their own business inside out but what they need to also do is build their business acumen, take the time to step outside of their business for a moment and see if there are different ways of doing things."

Price makers not takers

There are significant opportunities ahead for Australian agribusiness players, especially for SMEs that are "entrepreneurial, well-connected, future-focused with a strong strategic mindset, and effective leadership and team-building capabilities".

"The future of for the Australian agribusiness is very much likely to be built around networked, tech-savvy future and trend focused, entrepreneurial market makers," Dr Peloso said.

"These market makers will have a relentless focus on everyday operations and continual exploration in terms of markets, products, business methods and models, networks and curiosity."

An important key to future growth will be moving the producer end of the chain away as much as possible from the 'price-take' model, whereby products have minimal differentiation, to one where premium products and brand reputation allow for premium pricing.

"Australian producers have tended to be price-takers," said Dr Peloso. "But there is so much opportunity to move away from that. This is built on measurable and perceptual factors such as quality, brand recognition, reputation, variety, and loyalty among consumers.

"There are so many success stories in Australia of innovative product positioning and brand building. Think Tasmania and you think, 'Wow'. Think Margaret River and you think, 'Wow'. But across the country we have these 'Wow' regions.

"Look at the Wagyu beef industry in Australia - it's the second largest after Japan. It's a lesson in ingenuity and brand building."

One of the strengths of the Australian agriculture industry, and one that should be further built on, is the strong culture of 'coopetition' - when competitors in a particular market or region collaborate to share insights to benefit the whole sector.

"There is a really powerful informal social network, particularly in Queensland, sharing capabilities, sharing knowledge," said Dr Peloso.

"We suggest a focus on regional and virtual mini-hubs, centres of produce specialisation, and coopetition models, to enhance revenue and virtuous cycles systems."

Factors for success and opportunity

The report highlights a set of key critical success factors and opportunities in the Australian agribusiness sector - a focus on technology, advanced business models, growth of export markets, market-oriented product focus and the development of technologies and systems to take advantage of favourable weather conditions and mitigate less favourable ones.

  • Focus on technology - To date, the tech sector has not aggressively focused on innovation and start-up opportunities in agribusiness. "We believe that this will change and that the start-up communities clustered around research centres, universities and consulting outfits will foster such change," said Dr Peloso.
  • Advanced business models - As economies of scale grow so does control over cost structure, margins, leverage with suppliers and partners, and access to capital. "Despite increasing competition from foreign owners and corporates in the marketplace, a savvy understanding of business models, including system thinking and disruptive models, fosters growth and opportunity options," Dr Peloso said.
  • Growth of export markets - Enhanced marketing, branding, positioning and strategic thinking capabilities are necessary and would rapidly enable SMEs and micro-businesses to increase market share, and build portfolios of both capabilities and offerings.
  • Market-oriented products - A very disciplined focus on trend analysis and trend watching is a must. Links with key strategic partners, and also with those that can enable the building of internal and eco-system capabilities, should be sought by ambitious entities in the marketplace who can act as market makers and marketplace models.
  • Favourable weather conditions - Australia is notorious for its harsh climate and Australian businesses, research institutes, and weather technologists are among the most advance in working with and mitigating climate vagaries. "There must be heightened emphasis on mitigation. This not only supports the industry; it also benefits the economy, and given the focus on eco-sustainability, will have more far reaching positive outcomes." said Dr Peloso.

Dr Peloso said that these enablers of success are already embedded in the Australian agriculture sector but there are opportunities to build on them.

"There are opportunities in our own backyard in the domestic market and equally there is opportunity offshore," he said.

"To make the most of them, it's important businesses think about how they could do things differently, smarter, and better, be it on domestic shores or offshore, to take advantage of those opportunities.

"Overall, while the agribusiness sector as a whole is well-placed in terms of technology, access and advanced operating and strategic capabilities, individual players, especially SMEs, would greatly benefit from seeking access to high level strategic and innovative business model advice."

You can read the full whitepaper here.

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