13 Comments

Summary:

The future of fresh fruit and vegetables could be disrupted by a new business model of distributed growing and no up front fee “produce purchase agreements.” You know, like a solar PPA with a foodie twist.

Screen Shot 2012-02-24 at 8.54.44 AM

In his series of books on innovation, Harvard Business School Professor, Clayton Christensen makes one of the most compelling cases yet for the following maxim: You can build a better mousetrap, but that doesn’t mean they will necessarily use it.

Christensen’s argument goes something like this: Innovations that disrupt markets nearly always start with a new, or newly applied, technology that offers a significant improvement over previous ones. But, great technology alone is not enough for success.

To truly shake things up in a market, innovations also need new business models as well as what Christensen calls “value networks” – new supply chains, channels to market and so on. Without such support, established leaders can squash or co-opt new players, sometimes killing or at least sidelining their innovations along with them. Sometimes it can take a long time for new business models and value networks to evolve in support of a “new” technology.

This fundamental shift could soon happen for fresh food – yes, I said food! – and at BrightFarms we’re building a new business model around produce. But before we explore the future of food, let’s take a look back at other disrupted sectors, such as the auto industry, digital music and clean power.

New business models

The automobile was invented and patented by Karl Benz around 1885. But automobiles did not displace horse-drawn carriages for everyday personal transportation until Henry Ford started mass-producing the Model T in 1908 and Congress passed the Federal Aid Road Act in 1916.  Electric vehicles may again disrupt the auto sector, though none of the EV makers have revolutionized the auto world quite yet.

Another example is MP3 technology, which – combined with online music downloads – has revolutionized the music industry. MP3 technology was invented in the late 1970s, but could not be commercialized until the industry adopted standards in the early 1990s. Even then, it took another decade for Apple to introduce the iPod and iTunes – a killer combination of inexpensive and easy to use hardware and legal online content.

Then there’s solar power. The sun as a source of energy dates back to ancient times, of course. But its first potentially mainstream applications – most notably a satellite powered by a small solar cell – emerged in the 1950s.

Solar technology research and development has continued over the last 50-plus years, but solar languished as a commercially viable alternative to fossil fuel-based sources of energy because of low oil prices.

We did not make significant progress in the deployment of solar until it made business and economic sense.  As the price of a kilowatt-hour of electricity rose, the price of solar in many markets suddenly made economic sense.  Even then, it took a business model innovation – the power purchase agreement (PPA) – for rooftop solar to take off.  The solar PPA enabled users to purchase solar-generated electricity as they consumed it, with no upfront cost of building a solar plant.

The future of food

But, how about food?  Yes, I said food.

Just as there has been a growing consumer demand for clean energy, there has also been a growing demand for fresh, locally grown produce. The USDA expects consumer demand for locally grown food in the U.S. to rise from an estimated $4 billion in 2002 to as much as $7 billion by 2012.

The centralization of food “manufacturing”, however, has resulted in a system of food built for travel, not taste. And our centralized food supply chain actually defies nature.  Our system grows tomatoes in Mexico to sell in St. Paul, Minnesota in the dead of winter – and by the way, it usually is a dead tasting tomato. With this long and complex supply chain, most Americans also have no idea where their food comes from.

Yet, we have had the technology for centuries to grow fresh local produce 365 days per year, throughout the U.S., in hydroponic greenhouse farms.

Hydroponic systems grow food with less water, land and pesticides, and they produce much higher yields.  “Hydroponics  (from the Greek words hydro [water] and ponos [labor]) is a centuries-old method of growing plants using mineral nutrient solutions in water and without soil.”

A controlled rooftop environment makes the entire system isolated from many of the causes of contamination (such as a field’s water and workers coming in contact with livestock run-off).

At BrightFarms we are deploying business model innovation for produce that could disrupt the produce industry. Think of the model like a solar PPA, but for produce – a “produce purchase agreement”. A PPA between BrightFarms and major supermarkets disintermediates the old system.

Instead of transporting produce thousands of miles, we finance, build and manage (in partnership with local farmers) greenhouse farms to grow and sell produce in the same community.

So, instead of paying for transportation, (the average food item in the U.S. travels 1,500 miles), shoppers are paying for better produce. Plus, our shorter and simpler supply chain results in fresher, safer, longer-lasting, tastier and more nutritious produce that uses fewer pesticides and less water and land, and that mitigates contaminants and run-off.

Hydroponic greenhouse technology, like solar, has been here all along. We just needed the PPA business model as a disruptive innovation to unlock it’s potential.

Paul Lightfoot is the CEO of BrightFarms, the only year-round producer of fresh and locally grown produce, soon to be nationwide. BrightFarms created a breakthrough business model, the Produce Purchase Agreement (PPA), to partner with supermarkets to create greenhouse farms nationwide.  BrightFarms delivers locally grown fresh tomatoes, lettuces and herbs to eliminate time and distance from the produce supply chain.

  1. I’m all in favour of eco-tech like this. Real , practical eco-tech. There’s a Euro based system called Verticrop which is also amazing.

    Share
  2. It shows how a new industry can have an unexpected impact on everyday life. Recently I read articles about hydroponics growing; it’s all about growing plants in soil-less media using only water and hydroponic nutrients. Hydroponics crops can bring high profits for those who are successful in this form of horticulture.

    Share
  3. It shows how a new industry can have an unexpected impact on everyday life. Recently I read articles about hydroponics growing; it’s all about growing plants in soil-less media using only water and hydroponic nutrients. Hydroponics crops can bring high profits for those who are successful in this form of horticulture.

    Share
  4. Despite the two comments so far, hydroponics will not fly. The “things” grown hydroponically should not be called plants and should certainly not be called food. It is just the latest energy intensive way to shape an ersatz product I like to call “flavored calories”.

    Share
    1. Using hydroponics can be energy intensive, but your comment implies that conventional agriculture is somehow not energy intensive. Conventional approaches use far greater amounts of water, fertilizer, and pesticides. It costs energy to produce fertilizer and pesticides. Further, it takes energy to distribute and apply both to the fields. Water also takes energy to apply. The tractors all use energy. The trucks that transport the harvested product 1500+ miles use energy. The intensive packaging used to protect product traveling 1500+ miles costs energy to produce and dispose of.

      In short, all forms of modern agriculture use a lot of energy. Hydroponics provides a way of more efficiently producing certain types of crops.

      Share
  5. Reblogged this on Dots Of Color.

    Share
  6. This sort of innovative approach is always welcome, but with gas prices about to rise drastically, simplifying the supply chain makes even more sense.

    Share
  7. It is just the latest energy intensive way to shape an ersatz product I like to call “flavored calories”.

    Share
  8. Despite negative comments from others. It is part of the future of the security of the food supply chain. I am growing Pak Choi hydroponically. Initially in a test situation in my garden capable of producing 400 plants per week 365 days a year. I have recently obtained planning permission for the first of 5 greenhouses in my garden. Using a stacked system in a controlled environment one greenhouse can produce 32,000 plants per month. Product which is grown with rainwater, no pesticides or additives to prolong the product life and delivered still growing in specicially designed trolleys to the consumer and sold in a fresh market. The range of products include vegetables, tomatoes, cucumbers, peppers, wheatgrass, herbs, cattle fodder, cut flowers, pharmaceutical research products etc. With the advent of the led lighting and solar panels it is possible to grow and transport the fresh naturally grown products to the consumer at a healthy profit margin. The downside is the capital investment required but payback on the system I am using and expanding is 12 months. Good for the consumer, good for the environment and good for the future security of the supply of food

    Share
  9. Are there any differences between food in hydroponic systems versus food grown in the ground?

    Share
  10. This is all fine and I certainly subscribe to the “think global, eat local” mentality, but most Americans won’t eat fresh food even if it’s readily available. They prefer convenient, pre-packaged crap from the middle aisles of the grocery stores over having to actually cook from scratch. Getting them to break this horrible habit will be a challenge.

    Share

Comments have been disabled for this post