Clockspeed, Capital, and Conviction: Considerations for R&D and M&A in Agribusiness

I frequently hear comments surrounding whether incumbent agribusinesses are investing enough in R&D, or that they are not acquiring enough startups, and how this all means that they are going to get disrupted.

Depending on your biases, all, or none of this could be perceived to be correct.

I think it’s worth breaking down the industry dynamics and corporate incentives to understand how and why some of these investment decisions, or lack thereof, get made.

There is a very consistent comparison — looking at pharmaceutical companies, or looking at tech companies like Amazon. These groups tend to spend ~14% of revenue on R&D. On average, we see well below 30% less than that in agriculture:

The suggestion is often that that big ag is asleep at the wheel and will get disrupted, or that they aren’t doing enough to support farmers.

I understand the appeal of this framing, and the potential truth in it. The optimist in me wants to see more investment in agricultural innovation. But the business person in me sees a more nuanced picture. The argument that ag incumbents should simply spend more on R&D and acquire more startups misses critical context around industry structure, the rate of technological change, capital allocation tradeoffs, and the power of distribution.

To make sense of all of this, frameworks are useful.

Three in particular have shaped how I think about investment dynamics: Charles Fine's Clockspeed, Michael Mauboussin's capital allocation research, and Clayton Christensen's work on disruption. Plus, a few others from Ron Adner and Winning the Right Game, and Capital Allocation according to William Thorndike (author of The Outsiders) present useful considerations for what guides executives to invest where, when and how.

Together, they offer a more holistic picture of how agricultural incumbents think about strategic investment.

Clockspeed and Agriculture

In the book Clockspeed: Winning Industry Control in the Age of Temporary Advantage, author Charles Fine argues that every industry has its own rate of evolutionary change, what he calls its "clockspeed."

Some industries cycle through new products, processes, and business structures rapidly. Personal computing, semiconductors, software, and internet services sit at the fast end. Product generations are often measured in months, and in the case of AI lately, sometimes weeks (or days). Aerospace, energy, and agriculture evolve over longer cycles. Product generations in crop protection chemistry or seed can span a decade or more, without factoring adoption timelines afterwards. Even in a platform shift scenario, say, a movement from spray-based crop protection to light/laser-based, the farmer adoption curve remains long and geographically uneven.

Fine talks about clockspeed as an indicator of how enduring competitive advantage will be for companies within the industry.

I think it matters for a second reason: