How a new business model could revolutionize fresh food

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.