John Deere’s shift to recurring revenue is an area that continues to interest me. I wrote on automation and the SaaS (software as a service) dynamic in August 2021 and when highlighting the John Deere 2021 Annual Report in March, which has been the most-read analysis I have written this year.
In this LinkedIn post, Tenacious Ventures co-founder Sarah Nolet highlights some key points. One that stood out to me was this section on dealers shifting as Deere focuses on recurring revenue:
“Agronomic capabilities. Dealers too will need to think differently as the shift to recurring revenue occurs. I expect the trend of bringing agronomic expertise in-house will accelerate given the impacts that, for example, autonomous weed management tools will have on input decisions (including margins and perhaps volumes, as uptake of variable-rate increases).”
I agree with her. We have already begun to see this in Canada. Deere talks about their pillars of precision being telematics, guidance and data management – all of which they are well positioned to deliver on.
What happens with precision if you do not have strong agronomic recommendations associated with it is poor agronomy applied precisely, which actually leads to worse outcomes than broad-brushing good agronomy! Naturally this lends itself to having agronomic expertise integrated at the dealership and does so in a way that can eliminate some of the product bias often talked about within the sector.
I was recently having a conversation with my friend Patrick Hancoop of AgTech-Pro, who has extensive background in technology and equipment, and he noted that Deere has consistently had dealerships with best-in-class knowledge around technology.
He also noted something that I had experienced in the agronomic and crop input space – those dealerships with strong people in technology also tended to be better at selling the entire equipment package. They’re selling solutions, not products.
This reinforces more synergy between technology and equipment, and the stronghold position Deere has not just because of its technology or equipment, but also because of their distribution advantage, as my friend Matt Coutts points out in his must-listen podcast on Deere.