This week's Technology Corner takes a closer look at how autonomy and digitization play into John Deere’s overall strategy and revenue growth — based on comments from the company’s recent reports and investor calls.
Deere’s fiscal year 2022 investor presentation identifies the company’s strategy as delivering intelligent, connected machines and applications that revolutionize production systems in agriculture and construction to unlock customer value in a sustainable and profitable manner.
Key to execution of that strategy is the technology stack, Deere says, and the company has made some significant moves in this space in the last year.
In Deere’s 2021 Annual Report, Chairman and CEO John May says the company devoted $2.5 billion to research and development, and capital expenditures in 2021. Investments included the purchase of Bear Flag Robotics, a startup that retrofits autonomous driving technology onto existing machines, and the acquisition of Harvest Profit, which has software to measure profit at the field level. Deere also announced a joint partnership with semi-autonomous sprayer company GUSS Automation on April 21, 2022, the day following the recording of this Technology Corner segment.
Customers engaged with a record 315 million acres globally using the John Deere Operations Center in 2021, according to the company’s annual report. Engaged acres reflects the number of unique acres with at least 1 operation pass documented in the Operations Center in the past 12 months.
Going forward, Deere aims to have 500 million engaged acres by 2026, with 50% highly engaged, meaning multiple production steps are documented and digital tools are used to complete multiple activities over a 12-month period.
As Ag Equipment Intelligence previously reported, Deere is looking to achieve a 10% recurring revenue mix by 2030. Analyst Shane Thomas of Upstream Ag Insights says that 10% would be close to $5-6 billion when accounting for business growth over the next 8 years.
During Deere’s 2022 first quarter investor call, chief financial officer Ryan Campbell said autonomy will play a significant role in achieving that goal, as will further developing a sense and act platform. Deere previously said See & Spray was the first step in such a platform.
Deere plans to sell its autonomous 8R tractor as a subscription service, though the details are still in the works. See & Spray Ultimate, Deere’s green-on-green smart sprayer, also lends itself to a novel pricing model that enables recurring revenue, Thomas says.
He writes, “Deere will be continuing to maintain and improve the software capabilities that make the See & Spray technology more valuable to the farmer … That continued investment from Deere will deliver new and better outcomes to farmers, which warrants a continued annual fee, assuming it is priced fairly.”
Encouraging the adoption of technologies like See & Spray Ultimate also feeds into Deere’s goal to have 75% of engaged acres be sustainably engaged by 2030. The company defines sustainably engaged as the incorporation of 2 or more sustainable John Deere technology solutions or sustainable practices over a 12-month period.