The changing international financial scenario has created a new agricultural entrepreneur who is not only focused on the production of foodstuffs, but is also capable of performing on the global market. In such a framework, the new challenges of the modern world require a significant effort to adapt, above all in the agricultural sector which has been penalised for its limited dynamism and scarce tendency for innovation. On the other hand, however, such challenges can present opportunities for those producers willing to grasp them by adapting their way of doing business.
These new opportunities / criticalities concentrate around certain themes, among the most important of which are globalisation, the quality and intangible value of the product, agriculture and technology, business networks and entrepreneurship in the agricultural sector.
These closely linked themes were developed in a study performed by Veneto Agricultura
(Note 2) in April. Below is a summary of such themes.
Globalisation
In relatively recent times, the 'globalisation' phenomenon has also involved, and with a strong impact, the production and marketing systems of goods destined for human consumption, thus causing an increase in consumption, production and exchange.
This situation is posing serious and urgent questions concerning the reformulation of sector policies that influence agricultural development systems such as that of the individual farms and businesses. Critical features such as production chain relations, organisation and positioning on markets, collaboration networks and innovation thus become central factors in the management of farms and characteristic and driving elements of the agri-food sector. The international competitive context demands entrepreneurial ability, decisional flexibility, a rapid reaction to change, growth, innovation, organisation and development of the production chain and network. Several pioneering agricultural farms from the region of Veneto have moved in this direction, pursuing a constant qualitative increase in their products, linked to improvements in farms organisation, innovation, and optimisation of production factors, while also investing in marketing and the sales network directed to both close and distant markets.
The globalisation phenomenon is also seriously influencing the economy of Italy and Veneto, a strong point of which is orientation towards export. In 2011, an increase in exports from Veneto was registered alongside significant increases in the exportation of products from the agri-food and beverage industry, among which it is worth highlighting the 1.3 billion euros made in the international sale of wines from Veneto. In contrast, the exportation of unprocessed agricultural and fishing products from Veneto dropped by 2.6%.
It therefore appears evident that the Veneto agricultural system has high-value intrinsic characteristics which can be further enhanced and developed in order for them to be transformed into a competitive advantage on an international level. Production specialisation in several niche products including wines, cheeses and fruit and vegetables have provided a certain value but up to now this has been predominantly limited to a local level. In other words, the tendency is to sell only a few tens or hundreds of kilometres from the production location, partly in response to the need to shorten the production chain (direct sale and farmers' markets). Nevertheless, examples of success have mainly been observed in the winemaking sector; a testimony to the fact that globalisation offers made in Italy products the opportunity to become recognised and sold even in distant markets.
Business networks may perhaps have a decisive role in helping the region of Veneto to surpass its territorial boundaries and promote business relations for small entrepreneurial farms.
Thus the ability not only to produce excellent products but to concretise collaborative relations for shared development projects regains importance; both to reach a critical mass, but also to allow specialist energy to be focused on marketing and on the sales network. In this context, value creation is determined by knowledge. It is human capital which, when combined with a high level of formal education translated into talent, ability and creativity, becomes a critical element for success. In the past, knowledge was almost exclusively directed towards researching how best to allocate resources in order to achieve efficiency. Today, this research is aimed at producing new services and new products, which anchor the physical, material goods to intangible elements, desires, experiences and meanings. Across the world, the made in Italy brand represents high quality, luxurious niche products within the clothing, furnishings and automotive sectors. In the future, the brand will be able to establish itself even more so for many agri-food products. The intangible values drawn from our food culture, which include tradition, handcrafting, the connection with the earth, the Countryside and the brand can be sold across the world, amplifying diffusion and the consumer pool across borders and time, and thus multiplying value.
The quality and intangible value of the product
The excellence of the entrepreneurs, whether in the agricultural sector or not, lies in their ability to grasp any opportunity provided by the market, to understand how to predict the needs of the client and translate these into new products and services. This is, in short, what makes businesses innovative; this is what opens doors.
One of the aspects upon which the most innovative businesses focus in order to gain the competitive advantage over others, is the supply of 'quality products'. But what quality are we referring to? Organoleptic quality, commercial quality or technological quality? And how does one achieve said quality? The road which transforms 'quality' into business 'opportunity' varies, much like the concept of quality itself. Today, this concept is increasingly understood as a vehicle through which to respond to the expressed and latent needs of the consumer. In fact, quality is no longer understood as simply an intrinsic element of the product, but more as an attribute which is added to the characteristics of the product itself.
It is moreover possible to confirm that the new market is no longer moved by needs but by desires; the need thus arises for producers to satisfy the desires of consumers instead of satisfying their needs. It has in fact been clearly observed from the market research that consumption, including that of agri-food products, is becoming increasingly linked to the consumption of meaning, emotion and intangible experiences instead of the consumption of material goods. This is 'dematerialisation', in other words the movement from an economy of needs to an economy of desires, using knowledge as a shared and consistent resource.
Several farms and businesses have grasped these changes in consumer consumption and purchasing style for food products and have focused on offering ready-made products. Others have concentrated on differentiation, others on the attribution of 'values' or 'meanings' connected to well-being, environmental respect and tradition to the product. Several have focused on satisfying the needs of the final consumer, others have instead focused more carefully on the needs of intermediate clients present in the production chain. The agricultural entrepreneur generally has intermediate clients as its main referents: wholesalers, Large-scale Organised Distributors (LOD), shop owners or the industry. However, all players in the agricultural production chain have the final consumer as their point of reference, and they should therefore capture the explicit and latent needs of the consumer: what the client wants to consume and how he uses the products. The entrepreneur should understand the consumer's lifestyle.
This means harnessing the opportunity to satisfy the needs of those consumers who require ready-made products, for example, or fulfilling the requirements of LODs concerning product quantity and qualitative standards, by introducing technical and organisational innovations to the farms and business, investing in the creation of transformation platforms and in production and delivery organisation, which must be carried out in only a few hours, maintaining the cold chain.
It is therefore about understanding how to use modern distribution chains and adopting the necessary product innovations in order to be competitive, adopting methods and procedures which involve certifications, controls, labelling, traceability, segregation and the packaging of products.
Agriculture and technology
Since agriculture was born, since man developed this new knowledge, from that moment, it was observation, experimentation, practice and experience which has led to improvement, perfection and the birth of new agricultural techniques, and above all, new technology. Technology is nothing other than the concretisation of knowledge, the putting into practice of acquired knowledge using specific procedures.
Today, after 10,000 years or so of farming history, it is possible to identify two paradigms of technological use.
The first is the hard technology paradigm: the legend of technology applied to agriculture, from innovation research to the spasmodic use of ever greater technological 'power' in order to increase agricultural productivity. In fact, technology is translated into economic value the moment that an increase in per hectare or per working unit productivity is labelled as the objective. This hard technology or industrial agriculture paradigm represented an example of technological success for the industrialised world, not only in relation to the ability to produce more food using less land, but also and more importantly, for the capacity to produce much more food using less manpower. This development model continues to prevail even today. Despite high energy and economic costs and the heavy repercussions on the climactic, environmental and social level, the most advanced technologies, whether mechanical or biological, and facilitated by chemical and genetic technology, dominate the agriculture of industrialised Countries and continually stimulate new innovative drives in the technology sector.
The second paradigm is that of soft technology. Over the last decades, the agricultural sector of industrialised Countries seems to have become a victim of its own past technological success. It appears to be in difficulty when faced with the economic and role development which the agri-food sector system has assumed in the markets, predominantly in the most developed Countries. In fact at present, 'producing more food' is no longer the only priority, given that the constant availability of food is now considered - sometimes erroneously - to have been achieved. Other criteria have gained importance and this change in perceptions has also altered the definition of priorities in terms of agricultural technological development. Technological development appears to be in transition between a technological application driven towards 'power' towards a more 'mild' technology which is more efficient and profitable. There is a strong connection between social and demographic changes and agri-food demand and the diffusion of new technologies across the agri-food sector. Through experiments and the introduction of innovations during the various phases of the productive process, the agri-food sector is attempting to stay in step, if not anticipate, the development of consumer needs, which are increasingly dictating the content, orientation and paths of development. In a developed society, when you pay for a food product, you are paying above all for its 'service' attributes and its convenience is understood in relation to its ability to satisfy consumer desires linked, for example, to the need to reduce the time taken for food preparation ('ready-to-eat', pre-cooked and frozen products, ready-prepared vegetables, single servings, etc.), to satisfy quality and food safety requirements (health and/or diet foods, light, functional or enriched foods, organic produce, etc.), and ensure accessibility and conservation (packaging, logistics, traceability, etc.).
The most innovative agricultural farms have already realised that the greatest marginal value attainable from technology lies in its application during the phases which precede or follow agricultural production: research (genome, biotechnology and nano-technology), harvesting, processing, conservation and transportation of goods (automation of manufacturing processes, packaging, marketing, logistics, IT, etc.) or alternative sectors (use of biomass for energy needs, photovoltaics, etc.). Due to the fact that in these contexts, technology leads to differentiation, the industrialisation of food connected with agriculture constitutes a winning competitive advantage ensuring its permanence and protection on the market.
Business networks
Broadly speaking, network is not a recent invention. In our system of production, networks have been acknowledged for a long time and in the evolution of relations among businesses, it is worth highlighting that the agri-food sector has often taken centre-stage, if not a pioneering role, in the creation of networks.
Suffice to recall the consolidated presence of the agricultural cooperative system in Veneto, a story which began at the end of the Nineteenth century when groups of farmers decided to come together in order to overcome the size-related restrictions of their property and provide themselves with adequate productive structures. It is an ever-present issue if we recall that the break-down of the production base and the exiguity of average farm surface area represent some of the most important limiting factors on entrepreneurial growth in the primary sector in the Veneto.
In years gone by, the need to overcome the criticalities and inefficiencies resulting from size-related restrictions created conditions suitable for the birth of many Cooperatives, Consortia and Associations. These early networks of producers, capable of concentrating the product, creating large economies and providing the investments needed, sometimes evolved into distribution chain networks, which partly or completely focused on the various segments of consumables production. Participation in business networks provides the opportunity to go beyond the mere productive sphere by establishing stable relationships with distributors, importers and buyers and bringing to life suitable structures for promotion and commercialisation.
One of the merits of the cooperatives, consortia and associations in the agricultural sector has been to allow for farm fragmentation to be overcome without relinquishing individualism: one of the main characteristics of the entrepreneurial fabric of Veneto. In fact, the network allows the small entrepreneur to salvage control of his/her business, indeed to stay at its head, while at the same time broadening horizons, possibilities and opportunities: thinking big without losing autonomy.
On the other hand, it is worth highlighting that many farms and business and territorial networks in the Veneto agri-food sector subsist based upon relations between partners which can only be partially considered true network connections. Often these networking systems are obsolete and/or inadequate to the needs of the most innovative businesses, which require more modern and incisive forms of aggregation. In effect, these are territorial networks in which specialist expertise or risk sharing is rarely found, and in which the need to find indirect solutions which are acceptable to all partners often obstructs the realisation of strategies suitable for the innovators.
The networking experiences consolidated within the agricultural world are, in many cases, demonstrating their limitations within an increasingly complex economic backdrop in which business organisation requires flexibility and outsourcing. The modern concept of the network cannot then be understood as a collection of individuals who wish to become active parts of a bigger system, all roughly performing the same role using the same expertise. A different approach is needed: the network should act as a system of relationships between operators who accept their interdependence, and the need to divide costs, risks and investments, and specialise in certain functions in order to share the excellence of their professionalism with their partners. The functions in which the agricultural entrepreneur struggles to be professional and competitive, particularly those activities which fall outside of production concerning segments further along in the production chain such as marketing, communication and logistics, can be delegated to other players in the network.
This path presupposes the business re-thinking its own role: a cultural change before a management change.
Entrepreneurship in agriculture
Recognising an opportunity for the agriculture of tomorrow within the development of modern entrepreneurship is not a mere hope: it is a necessity. The agricultural entrepreneur is increasingly faced with varying prices, increasing production costs and international competition. How are these challenges to be overcome?
Some farms and businesses have done so by starting from their own history and specialisation, launching it into the future by revising their own experiences towards new objectives. This approach allows them to tackle the problem of innovation, quality, organisation and client and supplier relations, allowing room for the personal experiences of the individuals involved, the inter-personal relationships developed, and the interwoven networks which create a common space for the exploration of possibilities. This means that farms of today wishing to become enterprises must succeed in rethinking the activities of the past in search of new opportunities and innovation.
Other farms and businesses have predominantly worked on their differences and on the ability to interpret these positively, so as to transform them into valuable factors, responding to questions such as: what can I do that is unique? What can I do differently starting from what I know how to do? How can I integrate my specialisation into a production chain in an innovative way? How can my farm stand out from the others?
The future does not thus emerge on its own, neither can it be derived from automatisms put in place by others. Even the farmers must create their own future. And it is here that business expectations should be brought into play, mediated by ideas, by the desire to take risks, by making investments, but above all, by the ability to recognise the farm or business's uniqueness through the history that it has created. It is this uniqueness which must acquire useful value for others (Why am I different? Why will my uniqueness be of value to others?)
It is possible to deduce a common characteristic from the entrepreneurial success stories of many industrial and service businesses: that which distinguishes them is not only their attention to quality, modernity or the technological level of the goods and services put on the market, but the innovation (uniqueness) incorporated into the product, which creates a basis for exploration into the future possibilities of an increasingly complex and interconnected society, both on a local and international level. This is becoming possible due to farm and businesses' increasing openness to reciprocal collaboration in accordance with a network model which also includes the final consumer. In this way, innovation is no longer the result of an isolated stroke of genius from one individual or business, but benefits from converging attitudes on the part of many individuals which constitute the hub of relational networks, aimed towards the development of new possibilities: the characteristics of an economic operation that economists now refer to as 'an economy of knowledge'.
Thus the agricultural entrepreneur does not only need to innovate in order to improve its productive efficiency through renovating its product, updating productive processes and machines, improving the organisation, etc., but he must reply not only to cost but to the cultural needs of the client, the markets and the consumer.
The possibilities open to the Venetian agricultural entrepreneur in this sense are numerous, and are not only linked to the strength of typical IGP and DOC products, which are demonstrating true potential on global markets, but also refer to those opportunities presented by multi-functionality, specialisation and short or niche production chains.