Mahindra War Room 2019 Design to Disrupt

“DISRUPT THROUGH FAAS - FARMING AS A SERVICE”

LIVE CHALLENGE FROM FARM EQUIPMENT BUSINESS

“Disruption is, at its core, a really powerful idea!”

Chapter 1: Empathize

India has been a pioneer in agriculture, with manuscripts dating back to over
6000 years serving as great treatises on the science and art of agriculture. In
fact, India’s long run of prosperity was propelled by agriculture - Indigo dyes,
Cotton, Tea and Spices - all produced from the farm. Unfortunately, the long spell
of British rule over nearly 150 years left Indian agriculture in a near state of ruin.
From an agriculture surplus nation full of abundance, India went to food shortage
crises, propelled by the large scale shipping of food grains to feed Industrial
revolution’s factory canteens. As India became a newly independent nation in
1947, there were frequent scares of large-scale food crisis. The once prosperous
agriculture profession was left in deep poverty as India imported 7% of her total
food requirement in 1960s. Mahindra Group’s iconic founders, whose raison-d-
être was to help India realize economic freedom, empathized with the cause of
the Indian farmer, and made it their mission to help establish food security and
beyond, for which mechanization of the farm was the key.

Chapter 2: Design & Ideate

Mahindra’s right to win in Agriculture was more than just a well intentioned
aspiration. As an 18-year old successful company in 1963, Mahindra had the
experience of building two successful businesses in steel-trading and Jeeps
already then. Mahindra also had the experience of forming successful
international collaborations, re-imagining and adapting international designs to
suit the unique Indian conditions, and running an efficient manufacturing
operation in the difficult socialistic milieu prevalent in India then.

Chapter 3: Prototype & Test

American farm productivity was famed even in the mid 1900s, as tractors were
used extensively there since the first was invented in 1837. In some ways,
America pioneered large-scale agriculture - the average American farmer owns

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170 acres of land compared to the 14 acres of the European farmer and 2 acres
of his Indian counterpart. America was realizing much higher productivity per
acre in her farms, owing to the extensive use of tractors then. In 1960, Mahindra
reached out to International Harvester, a company with over 6 decades of
successful experience in making tractors for America, to form a joint venture that
would manufacture and market less than 100HP tractors to the Indian farmer.
Mahindra forged a joint venture with International Harvester and Voltas in 1963 to
manufacture and market tractors to Indian farmers. The Mahindra Tractor plant
was set up in Mumbai and the first tractors started to roll out in 1965, 9 years
after Mahindra rolled out the first Jeeps in 1956.

Chapter 4: Scale Profitably

Mahindra Tractors played a significant role in enhancing farm productivity and

ushering in the great Indian Green Revolution. From having to import 7% of the
total food requirement in 1960s, India began exporting food grains again - this
time for cash though! India’s food grain production improved from 82 million
tonnes in 1960-61 to 124 million tonnes in 1980-81, and further to 173 million
tonnes in 1990-91 to about 280 million tonnes last year. This growth is due to
consistent efforts in expansion of irrigation coverage, increased provision of key
inputs, using high yielding varieties of crops, and improved farm mechanization,
among other factors. Sales of Mahindra Tractors grew consistently, attaining a
40% market share in the mid 1980s, a position it has held unbroken till date.
Mahindra’s Farm business is renowned for its Total Quality Management
approach, being the first Indian company to win the Deming Prize and the Japan
Quality Medal. Since 1990, Mahindra started exporting Tractors worldwide,
ironically targeting the United States of America to begin with. Two assembly
facilities in Texas and Georgia were created with full service capabilities, helping
Mahindra attain 3rd position in the market, with sales of over USD. 600 Million. In
2005, Mahindra expanded into Australia with assembly operations in Brisbane,
and China through the joint venture route. In 2007, Mahindra acquired Punjab
Tractors Limited - the maker of ‘Swaraj’ brand of tractors popular in North India -
in a decision fraught with risks. Though Punjab Tractors had created the
successful Swaraj brand, the company was caught in a web of management
challenges and was eventually put up for sale. The acquisition, integration and
cultural transformation of Punjab Tractors by Mahindra is often cited as a case

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study of “the perfect M&A”. The agriculture value chain spans the gamut to
activities encompassing land preparation, harvesting and post-harvest
processing. While farm equipments were sold to an extent as accessories with
tractors, the quest for productivity led to Mahindra bringing a range of more
specialized farm equipment such as harvesters, threshers etc., though Farm
Equipment in India is much lesser penetrated compared to Tractors, causing
some to remark that Indian agriculture is “tractorized” and “not yet mechanized”.
Mahindra has sold 2.2 million tractors to 1.5 million customers in 40 countries.

In the early 2000s, Mahindra was the dominant force in tractors & farm
equipment with global scale production. The search for a broader vision to inspire
disruptive growth beyond just selling more tractors and farm equipment, led
Mahindra to ‘Farm Tech Prosperity’. Mahindra dreamed of doing everything that
makes a farmer prosperous - a goal that would grow their business as much as
improve the quality of life of farmers worldwide. For the Indian farmer, poor
productivity has always been a concern, arising from the lack of access to quality
“inputs” such as seeds, crop care and advanced irrigation practices. Pursuing
Farm-Tech prosperity, Mahindra assisted farmers by offering Crop-care, Seeds,
Micro-irrigation, and Agronomy, under the name of ‘Samriddhi’. Collectively, these
services became referred to as “Input Driven” businesses, where Mahindra helps
farmers with key inputs for farming, such as Seeds, Agri-chemicals and Micro-
irrigation. Today, there are over 300 fully functional Samriddhi Centres across
India offering inputs. More services on the “output” side, helping farmers to sell
their output for a better return than they would otherwise gain by providing them
market linkages for their produce were offered under the “Shubhlabh” business.
Businesses emerging from farm produce spanning Dairy, Edible Oil, Fresh Fruits,
Pulses, Processed Foods and Basmati Rice are now in various stages of pursuit.

The rapid growth of mobile usage in rural India drove Mahindra towards
businesses that help improve farm productivity through technology. Over the last
few years, digital businesses such as the MyAgriGuru app with essential farm
information, Trringo platform for renting tractors and equipment, Maati precision
farming solutions to guide farmers in using the right inputs at the right place and
time in right quantities, and investments in MeraKisan, Resson, Gamaya and
Carnot have been made. Mahindra now has a “farm to fork” presence, through
27 businesses across 9 companies and 18 subsidiaries.

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Chapter 5: Design to Disrupt

Agriculture and allied activities remain the main livelihood for India, with 49% of
total workforce contributing USD. 390 billion amounting to 17% of India’s GDP. Of
this, USD. 34 billion of agri-produce is exported. India has over 160 million
hectares of arable land, second only to the United States, and is the World’s #1
producer of Milk, Spices, Jute and Pulses. Of the 25 crore households in India,
18 crore live in her villages and depend on agriculture in one form or the other for
their economic growth. Yet, the growth rate in agriculture after liberalization is
minimal. Though a leading producer of multiple crops, India trails international
peers in key metrics and faces multiple challenges in the crop production cycle.
The rate of mechanization is low at 40%, compared to 90% in developed
countries and 70% in other developing countries such as Russia and Brazil. Land
holdings are small and segregated, with insufficient labour and multiple
middlemen between farmers and end-consumers.

At the core of helping the farmer earn more income is the ability to significantly
improve farm productivity. While tractorization helped India overcome food
shortage crisis and even become a net exporter over the last few decades, the
need of the hour is greater farm productivity and higher returns at the
marketplace. Small land holdings, over-dependence on rainwater for irrigation,
lack of access to technology and real-time information are some factors that
hamper farm productivity. Over 70% of farmers own one hectare or less, and
depend on loans for farming. While the demand for food is growing with
increasing population and greater consumption, supply is constrained in many
crops due to low productivity, shrinking labour and high wastage. For a majority
of Indian farmers, prosperity remains a distant dream, while “agri-distress” is the
norm. One idea that is gaining increasing traction as a possible solution to India’s
agri-distress is Farming as a Service, FaaS for short. The goal of FaaS is to offer
innovative, professional-grade solutions for agricultural and allied services via a
subscription, pay-per-use service across three broad categories:

• Farm Management Solutions, such as information sharing, analytics and

precision farming tools; information management between farmers,
government, corporates, financial institutions and advisory bodies.

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• Production Assistance, such as renting of tractors and farm equipment that

help production, labour services and utility services.
• Market Linkages, through digital platforms connecting farmers with suppliers
of input services as well as consumers of farm produce

While some solutions are reinventions of existing practices, others are tech-
driven innovations. These solutions have been adopted globally to provide a
gateway to innovation across the pre, post and production phases of the
agricultural value chain. Though FaaS as an idea is gaining greater traction in
developed markets, the potential of FaaS in eliminating agri-distress in India is
gaining recognition among Investors, Government, Entrepreneurs and
Corporations alike. While investor activity has increased in this area, the
government is also pushing FaaS based services through Customer Hiring
Centres (CHCs) and Soil-testing. Other initiatives by the Government to improve
infrastructure, promote digital transactions and increase institutional credit to
farmers are also expected to increase opportunity for FaaS based solutions.

With the backing of a strong mechanization business, long presence in input and
output businesses, as well as a digital footprint, Mahindra is uniquely positioned
to disrupt the farm business with FaaS and solve India’s big agri-distress
problem. Through FaaS, Mahindra can bring together the tractor and farm
equipment rental (Trringo), MyAgriGuru, Maati, precision farming solutions and
input driven businesses together, to offer holistic, crop-wise solutions to farmers,
and help them realize high productivity. And if this is offered on a pay-per-use
model, it can help reach out to a larger base of farmers, as capital investments
and financial hurdles will be avoided in FaaS. The service could be free, while
products could be profitable; or the service could be charged and the FaaS
offering could be product-agnostic. Mahindra’s benefit could be direct, in
monetary terms, or indirect benefit in terms of increased sales. What should be
Mahindra’s FaaS strategy to offer irresistible value to the farmer, and therefrom
derive benefit for the business as well?

Given the backdrop above, design a disruptive FaaS strategy for Mahindra,
to offer irresistible value to the farmer and help solve India’s agri-distress,
while realizing exponential growth.

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