PowerPoint Presentation

[Audio] Welcome to module 1 "Foundations: value chains, networks and ecosystems".

[Audio] Let us start with the big picture and look at agriculture as a system rather than as a sector made of individual farms. When we think of "the agri-food system," a useful way to picture it is as a journey from farm to fork. At the beginning, we have the input suppliers: seeds, plant material, fertilisers, crop protection products, animal feed, veterinary products, machinery, energy, and, increasingly, digital tools. Next comes primary production, the farms themselves, which may be arable, horticultural, livestock, mixed, or organic. Then the product is collected and stored, for example by cooperatives, traders, or storage facilities. It goes on to processing, where raw materials are transformed into food or other bio-based products. After that come distribution and logistics, then retail and food service, and finally the consumer. But this linear picture, while useful, leaves out an essential part of the story: the supporting actors. Agricultural advisors, research institutes, universities, banks and insurers, certification and control bodies, public authorities, and professional organisations all play a role. They may not buy or sell the product itself, but they influence how and under what conditions value is created. Along the whole journey, three types of flows connect the actors. The first is the flow of goods, meaning the physical movement of products. The second is the flow of money, meaning payments, credit, and subsidies. The third, and the one that is becoming more and more important, is the flow of information: quality data, production practices, sustainability indicators, prices, forecasts, and compliance documents. Why do I stress these three flows? Because digitalisation intervenes mainly in the third one. It changes how information is captured, shared, and used, and, as we will see, this has consequences for the other two flows as well. One more observation: this system is made of a very large number of actors with different sizes, objectives, and bargaining power. A small family farm and a multinational retailer do not negotiate on equal terms. Keep this asymmetry in mind, because it will be central when we discuss data sharing and fairness later on..

[Audio] Two terms are often used interchangeably, but they highlight different aspects: supply chain and value chain. A supply chain focuses on the movement of materials and products, from raw materials to the final customer. The key questions are logistical: how much, when, where, at what cost, and with what reliability? Supply chain management is about coordination, inventories, transport, and delivery. A value chain, a concept popularised by Michael Porter in 1985, asks a different question: through which activities does a product or a service gain value, and where is the margin created? Porter described a firm's primary activities, such as inbound logistics, operations, outbound logistics, marketing and sales, and service, supported by activities like procurement, technology development, human resource management, and firm infrastructure. The idea is that each activity can add value for the customer or reduce cost, and that competitive advantage comes from performing these activities better or differently than competitors. In agriculture and food, value can be added in many ways. Through quality: size, taste, nutritional content, shelf life. Through origin: think of protected designations of origin and geographical indications, which are very important in Mediterranean countries. Through sustainability: organic production, low-carbon products, regenerative practices. Through processing: turning olives into certified extra virgin olive oil, milk into cheese, grapes into wine. And through branding, storytelling, and direct relationship with the consumer. An important insight is that the value chain perspective moves our attention from "How do we produce more?" to "How do we create more value, and how do we keep a fair part of it?" For a farmer or a cooperative, this can mean deciding to move downstream, for example by processing or direct selling, or to differentiate their product through certification. Notice also that a value chain can be analysed at different levels: the individual firm, the whole sector, or even a global network. This takes us to the next slide..

[Audio] How do we analyse a value chain in practice? There is a fairly standard approach, used by researchers, development agencies, and consultants, and it is very useful for students to learn. The first step is mapping. We identify the actors at each stage, the activities they perform, and what they exchange: products, money, and information. A simple diagram on a whiteboard is often enough to reveal something surprising, such as an unexpected intermediary or a stage that nobody really controls. The second step is looking at value distribution. For a given product, say a kilo of tomatoes or a litre of olive oil, how much of the final price goes to the farmer, the cooperative, the processor, the distributor, and the retailer? This exercise is often eye-opening, and it explains why many producers feel that their effort is not adequately rewarded. It must be done carefully, because the shares do not tell the whole story: each actor also bears costs and risks. The third step is governance. Who defines the rules of the game? In many chains, the actors closest to the consumer, such as large retailers or brand owners, set quality standards, delivery schedules, and sometimes prices, and these requirements flow back to the producers. In other chains, cooperatives or producer organisations have stronger influence. Understanding governance is essential to understand who can change the chain and who has to adapt. We also distinguish between types of chains. Global value chains connect producers and consumers in different continents, with complex logistics and standards. National and regional chains are shorter. And short food supply chains, such as farmers' markets, box schemes, and community-supported agriculture, reduce the number of intermediaries. Across all these types, we find recurring issues: asymmetric bargaining power, lack of information about prices and quality requirements, price volatility, and high transaction costs, meaning the effort needed to find partners, negotiate, monitor, and enforce agreements. Keep this last point in mind, because transaction costs are exactly where digital technologies can make a difference..

[Audio] Value chain analysis is a powerful tool, but real life is rarely as linear as a chain. A single farm may sell to several buyers, buy inputs from several suppliers, belong to a cooperative, receive advice from a public service and a private company at the same time, and use two or three digital tools from different providers. This is why researchers increasingly speak of value networks. In a network, we can distinguish two kinds of relationships. Vertical relationships connect an actor with those upstream and downstream: suppliers and customers. Horizontal relationships connect actors at the same level: farmers with other farmers, processors with other processors. Horizontal cooperation is particularly significant in agriculture, which is characterised by a large number of small units. Cooperatives, producer organisations, and clusters allow farmers to aggregate volumes, share equipment and knowledge, and gain bargaining power. The way actors coordinate these relationships varies along a spectrum. At one end, we have spot markets, where parties trade at the market price without long-term commitment. Then come contracts, where terms such as price, quality, and volume are agreed in advance. Further along are partnerships and strategic alliances, based on repeated cooperation and shared investment. Cooperatives involve joint ownership. And at the far end is vertical integration, where one organisation owns several stages of the chain. What holds these arrangements together? Beyond formal contracts, trust, reputation, and shared standards play a key role. A buyer who knows that a supplier is reliable will accept lower inspection costs. A group of farmers who share the same quality protocol can sell as a group with a recognisable label. This is crucial for our topic. Digital technologies can affect each of these coordination mechanisms: they can make markets more transparent, contracts more automated, partnerships more data-driven, and trust easier to verify. But they can also shift power from one actor to another. We will discuss both sides, the opportunities and the risks, in the modules that follow..

[Audio] We now arrive at the central concept of this webinar: the business ecosystem. The term was introduced in 1993 by James Moore, who borrowed the biological metaphor. Just as in a natural ecosystem species depend on each other and evolve together, in a business ecosystem organisations of different kinds depend on each other, and their success is linked. Moore defined it as a community of interdependent organisations, including suppliers, customers, competitors, and institutions, that evolve capabilities and roles around a shared innovation or value proposition. In practice, we can identify typical roles. First, the orchestrator, sometimes called the keystone or platform leader. This is the actor that sets the architecture and the rules, and that creates conditions for others to participate. In digital agriculture, it may be a technology company operating a farm management platform, or a cooperative that provides services to its members. Second, the complementors, who offer products or services that add value to the core offer: sensor manufacturers, data analytics start-ups, machinery producers, advisory companies. Third, niche players, specialised in specific crops, regions, or functions. Fourth, the customers and users, in our case farmers, processors, and retailers. And fifth, the enablers: universities and research bodies, public authorities, standardisation bodies, financial institutions. Two features make ecosystems different from simple chains. The first is co-creation: no single actor can deliver the complete solution. A precision irrigation service needs sensors, connectivity, software, agronomic knowledge, and a farmer who is willing to act on the recommendation. The second is the combination of competition and cooperation, sometimes called coopetition. Two technology providers may compete for the same customers, yet both need to connect to the same data standard. So what distinguishes an ecosystem from a value chain? A chain is sequential, with one product moving from stage to stage. An ecosystem is a network built around a shared platform, a shared goal, or a shared market, in which several value propositions coexist and interlock. Chains can be parts of ecosystems, and ecosystems can serve several chains at once..

[Audio] Business ecosystems have a close relative in the agricultural world: the innovation ecosystem, or, in the language of European agricultural policy, the Agricultural Knowledge and Innovation System, commonly abbreviated as AKIS. AKIS describes the set of organisations and people who generate, share, and use knowledge in agriculture: farmers and their organisations, advisory services, research institutes, universities, education and training providers, input suppliers, and public authorities. The key idea is that innovation is not a linear path from the laboratory to the field. It emerges from interactions: a farmer's problem inspires a research question, a prototype is tested on a farm, the results are discussed with advisors, and the solution is improved by a company. A related concept is the quadruple helix, which extends the classical triple helix of industry, academia, and government by adding civil society, meaning citizens, consumers, and communities. In food and agriculture this fourth helix is very relevant, since consumer expectations and societal debates strongly shape the sector. In practice, these ecosystems materialise through different structures. Living labs, where innovations are tested in real conditions with real users. Innovation hubs and digital innovation hubs, which help companies and farmers access expertise and test-before-invest facilities. Operational groups and multi-actor projects, which European programmes encourage, bringing together farmers, advisors, researchers, and businesses around a concrete problem. Many of you are probably already familiar with such structures, and you may even be participating in one. TALLHEDA itself is an example: it connects higher education institutions, research organisations, and sector actors, and tries to translate real needs of the sector into learning opportunities and shared solutions. The main message of this slide is that innovation happens at the interfaces between different kinds of actors. Therefore, the quality of the connections, their openness, their trust, and their capacity to share information, matters just as much as the quality of each individual actor..

[Audio] We can now bring together what we have seen and ask: what exactly changes when value chains and ecosystems become digital? The first change is the shift from linear to networked structures. When data about production, quality, and logistics can be captured and shared digitally, actors who were previously separated can interact directly, in real time, and across the chain. A retailer can see, with the farmer's permission, how a crop was grown. A farmer can receive market and weather information from several sources and compare offers from several buyers. The second change is the reduction of transaction costs. Earlier we saw that finding partners, negotiating, monitoring performance, and enforcing agreements require time and money. Digital marketplaces, electronic documents, automated quality checks, and shared records reduce these costs, and this can make participation possible for small actors who were previously excluded. Third, transparency and traceability. Consumers, regulators, and buyers increasingly ask for evidence rather than claims: where was this product produced, with which inputs, with which environmental impact? Digital records allow claims to be verified, and this creates new opportunities for those who can prove their quality and sustainability. Fourth, new roles appear. Companies that provide data, analytics, platforms, and integration services become part of the chain, sometimes capturing a significant part of the value without ever touching the physical product. But we should also be honest about the risks. Digitalisation can create dependency on a few technology providers, concentrate power in those who control the platforms and the data, widen the digital divide between large, well-equipped actors and small or remote ones, and raise concerns about how data is used, for example to adjust prices or contract conditions. This is why we speak of the digital value chain as something more than the digitalisation of existing processes. It is a combination of physical products and data-driven services, embedded in an ecosystem whose rules, as we will see, must be designed carefully..

[Audio] Let us pause and consolidate what we covered in this first module. We started with the agri-food system and the three flows connecting its actors: goods, money, and information. We distinguished the supply chain, which is about the movement of products, from the value chain, which is about the activities that create value and the margin they generate. We saw how to analyse a value chain by mapping actors, examining value distribution, and understanding governance. Then we moved from chains to networks, looking at vertical and horizontal relationships and the different coordination mechanisms, from spot markets to cooperatives. We introduced the business ecosystem as a community of interdependent actors who co-create value, with roles such as orchestrators, complementors, and enablers. We connected this to the agricultural innovation ecosystem and AKIS. And finally, we saw that digitalisation changes the logic of all of this: it makes the flow of information central, lowers transaction costs, increases transparency, creates new roles, and also creates new risks. Now, an exercise. I invite you to choose one product you know well: it could be olive oil, tomatoes, milk, wine, honey, or any other. Take a piece of paper, or open a blank document, and sketch the actors involved, from input supplier to consumer. Then ask yourself three questions. First, which information flows are already digital, and which are still on paper or handled verbally? Second, who has access to which information, and who does not? Third, where do you see the biggest gap, the place where better information would most improve the outcome for the farmer? If you are watching live, please share one or two of your observations in the chat. If you are watching the recording, pause for a few minutes, and keep your sketch, because we will come back to it in the next modules, when we explore the technologies and data flows that can fill those gaps. In the next module, we will follow the product from the farm to the consumer's plate and look in detail at how digital technologies are changing each stage. Let us move on..

References. Carayannis, E.G. & Campbell, D.F.J. (2009). "Mode 3" and "Quadruple Helix": toward a 21st century fractal innovation ecosystem. International Journal of Technology Management, 46(3/4), 201-234. https://doi.org/10.1504/IJTM.2009.023374 EU SCAR (2012). Agricultural Knowledge and Innovation Systems in Transition: a reflection paper. Brussels: European Commission. ISBN 978-92-79-22252-8. https://doi.org/10.2777/34991 EU SCAR (2015). Agricultural Knowledge and Innovation Systems Towards the Future: A Foresight Paper. EUR 27692 EN. Brussels: European Commission. EU SCAR Strategic Working Group AKIS (2019). Preparing for future AKIS in Europe (4th AKIS report). Brussels: European Commission. https://scar-europe.org/akis-documents Kaplinsky, R. & Morris, M. (2001). A Handbook for Value Chain Research. Prepared for the International Development Research Centre (IDRC), Ottawa. https://www.fao.org/fileadmin/user_upload/fisheries/docs/Value_Chain_Handbool.pdf Moore, J.F. (1993). Predators and prey: a new ecology of competition. Harvard Business Review, 71(3), 75-86. Porter, M.E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press. ISBN 0-02-925090-0. TALLHEDA project. Horizon Europe, Grant Agreement No. 101136578. https://www.tallheda.eu Wolfert, S., Ge, L., Verdouw, C. & Bogaardt, M.-J. (2017). Big Data in Smart Farming: a review. Agricultural Systems, 153, 69-80. https://doi.org/10.1016/j.agsy.2017.01.023.

[Audio] Thank you!. thank you!. TALLHEDA has received funding from the European Union's Horizon Europe research and innovation programme under Grant Agreement No. 101136578. Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Research Executive Agency (REA). Neither the European Union nor the granting authority can be held responsible for them..