Post on 09-Jan-2017
Opportunity Halo – Commercial Vertical Farming
Opportunity Description
Addresses the increasing desire for locally grown, highvalue produce by growing it indoors in a controlled ‘verticalfarming’ system. High-value crops can be grown year-round, economically and sustainably using technology toobtain very high yields in little space and minimal labor.
Traditional land based agriculture is under pressure fromdroughts, collapsing water tables, climate change, soildepletion, fertilizer and pesticide overuse. Using newtechnologies of materials, sensing, automation,connectivity, software, energy management, and lowenergy LED lighting, certain crops can be grownhydroponically using no soil and 1% of the water and landof field farming.
Design and build all-encompassing VerticalFarming equipment and systems
Invest in or partner with developmentpartner (sensors, software, Internet ofThings, robotics) companies needed tocreate an integrated VF system
Invest or partner with established VerticalFarming Companies
Find best-in-class design and become acommercially viable Vertical Farmer
Develop a VF services business
Outcomes Profitably increase availability, reliability,
and sustainability of year round produce Minimize water & land usage, fertilizer and
pesticides, transportation, and spoilageExperiences Mitigate seasonally poor produce Mitigate spoilage and pathogen risks Enhance local access to healthy food
The technologies that are necessary to integrate arelighting, sensors, Internet of Things, software,automation (robotics), materials, and plant science.There are many companies developing specificsolutions in each of these technology areas but noone to date has created a truly integrated system.There are many possible development partnersavailable ranging from MIT’s CityFARM (an opensource resource for various production systems) toGrove, an agri-software developer.
The growth of ‘Plant Factories’ (e.g. hydroponics andvertical farming) is fueled by increasing food demandand rising environmental concerns. The hydroponicfood production industry is expanding at a rate thatis set to outpace the 2014 IMF estimate of globalgrowth by 80% and show sustained strength with a6.5% compound annual growth rate. Estimates of thePlant Factory equipment market are at $2B by 2020(the value of the crops produced being much higher).
Business Model
Value Claims Demand Side Factors
Design Side Factors
Opportunity Assessment – Strategic Position
• This opportunity falls near the outer boundary of the company’s strategic zone
• New-to-the-World factors include the rapid pace of technology development in lighting, plant-science and IoT analytics
• New-to-the-Company factors include the new customers, channels, and business models required to lead in this market/industry
Strategic Position
Opportunity Assessment – Should-Could
• High ‘should’ scores indicate that this
opportunity scores highly in those facts
that indicate it is an attractive
opportunity for someone to pursue
• Medium to low ‘could’ scores indicate
that this opportunity does not fit well
with current company competencies and
will require partnerships and a degree of
organizational independence to succeed
Should/Could
Opportunity Assessment – Readiness Level
• Overall readiness level is almost four: late stage validation to prepare for transition to incubation
• Organizational readiness is lagging: needs more attention
• Design readiness is ahead: can temporarily dial back on technological and engineering efforts to concentrate on market and customer efforts
Opportunity Readiness Level
Results of Business Model Simulation: Opportunity Halo
Survival rate of businesses with similar indicators
67%
Growth outlook for businesses with similar indicators
9% Neutral
Negative
Positive
Inc+BP+GF+Auton
Please click here to see complete simulation input form
Link has been disabled to protect proprietary information
Survival and Profitability Assessment
• There is 67% probability of the business as described existing in 10 years
• Most businesses (>80%) do not survive
• The factors that most reduce the probability of survival are the competitive landscape and the company’s ability to execute
• A long-term growth rate of 9% places the business as growing 2-3 times GDP
• Initial growth rates can exceed this rate by quite a bit as the business penetrates the market and achieves its nominal market share
• Mitigating growth factors include competition, grower market fragmentation, and product differentiation
67% 9%Probability of Survival Growth Outlook
Competition
Competition Insight
• There are a large number of participants in this market but no large, dominant players yet
• Many companies are entering this space but all are new and small
• Proliferation of new players provides partnership or acquisition potential
• Industry is highly networked and interconnected but with little coordination or standardization
• There are over 15 key CVF developers globally (private & public)
• There are 100+ indoor ag. OEM component suppliers
• Most companies are smaller companies and relatively new (this is a new market)
• Many CVF facilities are currently supported by government initiatives
• There is a high degree of variability in the competitive landscape
• Hydroponic vs. Aquaponic• Vertical vs. ‘Greenhouse’• Consumer vs. Commercial• DIY vs. Turnkey• Hi-tech vs. Lo-tech• Automated vs. Manual• Sterile vs. Open• Growers vs. OEMs
Competition Factors Competitiveness
Neutral
Extent to which the business is likely to survive or fail within its competitive environment, as estimated using Business
Model Simulation™.
Competitive Landscape (Selected Players)
DIRECT – TURNKEY SYSTEMS
PERIPHERAL – TECHNOLOGY/SOFTWARE/SUPPLIES FOR INDOOR AGRICULTURE
ADJACENT – COMPONENTS/SYSTEMS/EQUIPMENT/SERVICES
G-CON Manufacturing Inc (Green PODs)GreenTech Agro LLC (Growtainer, Growtroller, Growtainer) HioponicaVertical Harvest Hydroponics (Containerized Growing System (CGS)) VertiCrop (VertiCrop) CropKing Incorporated (NFT, Hydroponic Growing Systems)
Philips Lighting Holding B.V. (GreenPower LED)Autogrow Systems Ltd (Minidose, Intellidose, Multigrow, My.Autogrow)Argus Control Systems Ltd (Argus Control System)Motorleaf (Powerleaf, Heart, Droplet, Driplet, Operating Software)Growtronix (Growtronix Base System, Sensors, Detectors)Ecotechnics (Hydroponic Technology)
Vertical Farm Systems Pty Ltd (XA Series Automated Growing System)GreenGro Technologies Inc (GreenGro Blackout System, GroRooms)Pure Hydroponics (Commercial Hydroponic System) HydroStacker LLC (Hydrostacker Vertical Hydroponic Garden) Vertical Harvest Hydroponics (Containerized Growing System (CGS)) Aero Development Corp (Commercial AERO Systems)
Organization
Organizational Insights• Compatibility with current organization is low• No experience with the business model and
value network• Upfront financial requirements is quite large• Existing strong equipment design and
integration capability will be an asset• Advantageous local market position could
provide startup insulation
Business Model Parent Company Fit
Neutral
Extent to which the business is likely to be supported, or
prematurely divested, by its parent company as a result of
strategic alignment and organizational structure.
• Business requires new channels, markets, and customer relationships than the company now has
• Business requires new supply-chain and development partners than the company now has
• The company has recent experience launching a new business in a new markets
• Top-level executive support is high and commitment is sincere
• Company is willing to fund the effort providing milestones are met
• Unclear who would lead the business or how it would fit into existing organizational structure
• Unclear how long the company would be willing to fund the start-up incubation period
Market Momentum
Market Insights • Independent grower entrepreneurs are driving
the market – few ‘major’ players • Existing and new vertical farm
growers/operators are aggressive in building capacity but are limited in scope
• Distribution is an issue – current system is designed for non-local supply, but it is changing rapidly
• The US Vegetable & Herb revenue in 2015 will reach $79 Billion in totality
• 11% of this current crop revenue comes from indoor agriculture ($9B)
• Projected CAGR of 3% for the US Vegetable & Herb Market through 2020
• Projected CAGR of 12.5% for the indoor agriculture portion though 2020
• 80% of 9B people projected in 2050 will be living in urban environments
• Avg. distance vegetables travel = 1500 miles
• 80% of land suitable for growing is in use• Farmers need to produce 70% more food
to feed the population in 2050• Consumers are demanding more locally
grown food• Unavailability of labor is a market driver
Market Growth & Drivers Market Momentum
Positive
Extent to which the target market is showing signs of
likely interest and growth, or apathy and decline.
Market Profitability (Commoditization)
Profitability Insights
• Technology development (LEDs, Plant Nutrition, Automation, Control, etc.) is rapid
• Growing efficiency is rapidly improving with developments in plant science and controls
• Many alternative designs and options – no standardization to date
• High value crops justify initial investment and provide attractive returns
• Industry is far from commoditized: it is characterized by a wide variety of technologies, designs and solutions.
• Facilities & Equipment – up-front capital expenses to purchase CVF system – are significant
• Includes buying/securing (permitting) land and assets, utilities (water, electrical, sewer), environment control, etc.
• Offerings are quite diverse and variable• Custom design/build• Modular systems and subsystems• Components and technology
• Suppliers are struggling with scalability• Overcoming distribution channels• Differentiation of offerings• Market fragmentation
Market Offerings Market Profitability
Positive
Extent to which the target market is showing signs of
profitability or commoditization.
Focus Areas for Shaping
= Key focus area
Market Profitability
Technology Trajectory & Dynamics
Ability to Create Value
Alternatives & Differentiation
Market Momentum
Growth & Drivers
Players & Influencers
Partners & Action
Competition
Competitiveness
Competitive Companies
Value Network Dynamics
Organization
Business Model
Offering
Competencies
Key Discussion Points
• Competitiveness– The indicator is neutral indicating that the
business can be competitive despite some negative attributes
– The indicator is not negative because there is no dominant competitor in the space
– The indicator is not positive because the competitive landscape is volatile and dominated by many smaller, similar, companies
– Potential Areas for Discussion:• Identify and prioritize low-end or un-served
market segments• Seek out partner to achieve scale and influence
• Business Model– The indicator is neutral indicating that the
business model can work despite differences from company core businesses
– The indicator is not negative because the company has existing competencies in food equipment and services
– The indicator is not positive because these are new markets, customers, and services the company has not addressed before
– Potential Areas for Discussion:• The business may benefit from greater
integration with its parent company• The business needs to be allowed a period of
incubation while it gets established
Key Discussion Points
• Alternatives & Differentiation– Market profitability potential is positive
due to the high value of the offerings (products and services)
– A wide variety of offerings exists – from $100 kits to $1M building-size systems
– A lot of new technology is being introduced making it hard to differentiate the attributes of any particular offering
– No standardization yet
• Partnerships and Actions– Large number of established, but small,
companies provides partnership opportunities to jumpstart the business
• Look to adjacent companies that design and build automated CVF systems, for potential partnerships
– Local growers and end-customers within proximate geographic region provide opportunities for initial business
• Focus on local region to reduce costs, develop competencies, and establish a base of business
The Inovo Group
For more information, check out the portfolio resourceson our website, or drop Larry an e-mail.
With Inovo as collaboration partner and guide, clients transform their portfolios, cultures and future potential
Larry SchmittManaging Partner and Co-founderAnn Arbor, MichiganP: +1 (734) 604-3887E: lschmitt@TheInovo Group.com