To Beat Disruption, These Ag Retailers Became the Disruptors
Inside the strategic decision to build CommoditAg as a separate company—and why it led to a successful exit.
By Corey Tuinstra and Lourival Monaco
In 2017, the agriculture industry faced a looming threat to its business models: e-commerce. How would it upend their way of doing business? The daunting words “disruptive innovation” were being whispered around the industry.
A group of ag-retail executives saw this threat and found a unique solution. But what made it unique wasn’t a special product or a process. Instead, the retailers founded an entirely new business.
They called it CommoditAg. Five years later, it found a successful exit to Farmers Edge.
Despite the successful exit, this article isn’t about CommoditAg’s startup wizardry. Rather, I’m writing to detail the unique approach that incumbent retailers took to disruptive risk. Instead of building a business division or hiring more IT, they went and built the business themselves.
In this article, I’m going to explain three things: what caused retailers to create CommoditAg, how retailers benefited from creating an external business, and why companies should think of new business building in response to disruptive threats.
Starting Up
In 2017, venture markets couldn’t get enough of ag e-commerce. Farmers’ Business Network raised $40 million, FarmLead (now Combyne) raised $6.5 million, and Aggrigator grabbed $2.2 million. Agtech VCs saw e-commerce as the “Ag Retail 2.0.”
Following this industry trend, the Effingham-based cooperative The Equity launched an e-commerce platform to understand how the technology would affect their business. Leadership wasn’t trying to build the next Amazon—they just wanted to see if it was a disruptive technology. They directed their internal technology team to launch the first version.
In a short time, eight additional agriculture cooperatives invested in the business, coming on for various reasons:
- Some wanted to make a quick buck.
- Others, like The Equity, wanted to conduct a quick test.
- A third group wanted to build something new.
Within a few months, CommoditAg was mired in a number of problems stemming from being an extension of the cooperatives' businesses. Talent, operations, and standard operating procedures were the same as those of the cooperatives that founded it.
Retailers hadn’t realized that becoming a “digital” company isn’t just about making a website and listing your product. Real digital transformation affects the structure and communication of your entire operation. They needed a new “business system.”
As the cooperative owners realized this, they created an entirely new company and hired an external management team to run it. They gave CommoditAg every advantage that comes with being at a large company—existing channel partnerships, bargaining power, the ability to “move things really well”—but also the benefits of being a startup, being functionally separated from the main business.
This strong competitive positioning, along with the proficient management team, led to CommoditAg’s acquisition by Farmers Edge in 2021.
Building an External Business Was the Best Option
So the question becomes: Why didn’t retailers’ best attempts to internally build CommoditAg work? They had technological expertise, capital, and support from suppliers. What went wrong?
The answer comes down to one thing: You can't create a new system within an old one.
Trying to build a disruptive innovation within the confines of an existing organization is like trying to sail a modern ship with ancient maps. No matter how advanced the vessel, it won't reach new destinations if guided by old charts. Similarly, CommoditAg couldn't succeed while operating under the existing incumbent structure.
The cooperatives realized that true digital transformation required a fresh start—a new "business system." They needed to build an entirely separate entity that could operate with the agility and innovative spirit of a startup, unburdened by the legacy processes of their existing organizations.
Why Companies Should Think of New Business Building in Response to Disruptive Threats
Creating an external business like CommoditAg offers several advantages when responding to disruptive threats:
- Low Risk: Embarking on a new venture outside the core business allows companies to explore innovative ideas without jeopardizing their main operations. It's a way to hedge future uncertainties without committing excessive resources. Building a new startup might sound risky, but done right, it can be no more costly than another marketing or R&D expense.
- Collaboration: “I don’t know who discovered water, but we know it wasn’t a fish.” That’s a funny quote, but it’s absolutely true. If you want to solve fresh new challenges in your business, it’s great to get an outside perspective—a perspective that doesn’t know “how it’s always done.” Building a new business opens doors to fresh talent and partnerships. It brings together diverse perspectives, fostering an environment ripe for innovation.
- Staying Ahead of the Curve: It’s hard to constantly innovate, and it’s even harder to innovate while also worrying about your core operation. Building your business externally helps to solve that. At the same time, you can manage what you’ve got while also trusting a sharp set of entrepreneurs to ensure your future.
To Conclude
The story of CommoditAg illustrates the importance of thinking beyond traditional corporate structures when faced with disruptive innovation. By acknowledging that they couldn't effectively innovate within their old system, the cooperatives took the bold step of building a new one. This approach not only minimized risk but also fostered collaboration and kept them ahead in a rapidly evolving industry.
In a world where technological advancements can upend business models overnight, companies must be willing to step outside their comfort zones. External business building isn't just a defensive strategy—it’s a proactive approach to seizing new opportunities and securing long-term success.
By Corey Tuinstra and Lourival Monaco
In 2017, the agriculture industry faced a looming threat to its business models: e-commerce. How would it upend their way of doing business? The daunting words “disruptive innovation” were being whispered around the industry.
A group of ag-retail executives saw this threat and found a unique solution. But what made it unique wasn’t a special product or a process. Instead, the retailers founded an entirely new business.
They called it CommoditAg. Five years later, it found a successful exit to Farmers Edge.
Despite the successful exit, this article isn’t about CommoditAg’s startup wizardry. Rather, I’m writing to detail the unique approach that incumbent retailers took to disruptive risk. Instead of building a business division or hiring more IT, they went and built the business themselves.
In this article, I’m going to explain three things: what caused retailers to create CommoditAg, how retailers benefited from creating an external business, and why companies should think of new business building in response to disruptive threats.
Starting Up
In 2017, venture markets couldn’t get enough of ag e-commerce. Farmers’ Business Network raised $40 million, FarmLead (now Combyne) raised $6.5 million, and Aggrigator grabbed $2.2 million. Agtech VCs saw e-commerce as the “Ag Retail 2.0.”
Following this industry trend, the Effingham-based cooperative The Equity launched an e-commerce platform to understand how the technology would affect their business. Leadership wasn’t trying to build the next Amazon—they just wanted to see if it was a disruptive technology. They directed their internal technology team to launch the first version.
In a short time, eight additional agriculture cooperatives invested in the business, coming on for various reasons:
- Some wanted to make a quick buck.
- Others, like The Equity, wanted to conduct a quick test.
- A third group wanted to build something new.
Within a few months, CommoditAg was mired in a number of problems stemming from being an extension of the cooperatives' businesses. Talent, operations, and standard operating procedures were the same as those of the cooperatives that founded it.
Retailers hadn’t realized that becoming a “digital” company isn’t just about making a website and listing your product. Real digital transformation affects the structure and communication of your entire operation. They needed a new “business system.”
As the cooperative owners realized this, they created an entirely new company and hired an external management team to run it. They gave CommoditAg every advantage that comes with being at a large company—existing channel partnerships, bargaining power, the ability to “move things really well”—but also the benefits of being a startup, being functionally separated from the main business.
This strong competitive positioning, along with the proficient management team, led to CommoditAg’s acquisition by Farmers Edge in 2021.
Building an External Business Was the Best Option
So the question becomes: Why didn’t retailers’ best attempts to internally build CommoditAg work? They had technological expertise, capital, and support from suppliers. What went wrong?
The answer comes down to one thing: You can't create a new system within an old one.
Trying to build a disruptive innovation within the confines of an existing organization is like trying to sail a modern ship with ancient maps. No matter how advanced the vessel, it won't reach new destinations if guided by old charts. Similarly, CommoditAg couldn't succeed while operating under the existing incumbent structure.
The cooperatives realized that true digital transformation required a fresh start—a new "business system." They needed to build an entirely separate entity that could operate with the agility and innovative spirit of a startup, unburdened by the legacy processes of their existing organizations.
Why Companies Should Think of New Business Building in Response to Disruptive Threats
Creating an external business like CommoditAg offers several advantages when responding to disruptive threats:
- Low Risk: Embarking on a new venture outside the core business allows companies to explore innovative ideas without jeopardizing their main operations. It's a way to hedge future uncertainties without committing excessive resources. Building a new startup might sound risky, but done right, it can be no more costly than another marketing or R&D expense.
- Collaboration: “I don’t know who discovered water, but we know it wasn’t a fish.” That’s a funny quote, but it’s absolutely true. If you want to solve fresh new challenges in your business, it’s great to get an outside perspective—a perspective that doesn’t know “how it’s always done.” Building a new business opens doors to fresh talent and partnerships. It brings together diverse perspectives, fostering an environment ripe for innovation.
- Staying Ahead of the Curve: It’s hard to constantly innovate, and it’s even harder to innovate while also worrying about your core operation. Building your business externally helps to solve that. At the same time, you can manage what you’ve got while also trusting a sharp set of entrepreneurs to ensure your future.
To Conclude
The story of CommoditAg illustrates the importance of thinking beyond traditional corporate structures when faced with disruptive innovation. By acknowledging that they couldn't effectively innovate within their old system, the cooperatives took the bold step of building a new one. This approach not only minimized risk but also fostered collaboration and kept them ahead in a rapidly evolving industry.
In a world where technological advancements can upend business models overnight, companies must be willing to step outside their comfort zones. External business building isn't just a defensive strategy—it’s a proactive approach to seizing new opportunities and securing long-term success.