OLEKSANDR VERZHYKHOVSKYI, CHIEF OPERATIONS OFFICER AT IMC S.A.: FINANCIAL PERFORMANCE IS THE MAJOR REASON WHY WE INTRODUCE DIGITAL TECHNOLOGIES

02 March 2019

Hardly imaginable in the recent past, automated and self-driving tractors equipped with sensors, field drones performing aerial surveys and advanced analytical tools for predicting yields are increasingly becoming part of an everyday repertoire of today’s agriculture worldwide. How do farms implement digital technologies? What are the practical benefits of these innovations? What are the biggest challenges related to them? In an attempt to answer these questions, Largescaleagriculture.com interviewed Oleksandr Verzhykhovskyi, Chief Operating Officer of IMC, one of the world’s largest publicly listed agroholdings that operates 123,900 hectares of farmland in Ukraine. Oleksandr Verzhykhovskyi is among the speakers at the Science Lounge ”Digitization in Agriculture”, an event that is jointly organized by the Leibniz ScienceCampus “Eastern Europe – Global Area” (EEGA) and Leibniz-Institute of Agricultural Development in Transition Economies (IAMO) and will be held March 6, 2019 in Halle (Saale),Germany.

Nowadays automation and digitization of business processes become ever more popular among agricultural companies. Your company keeps pace with these modern trends. What are the benefits from implementing innovative technologies at IMC? Are digital technologies primarily advantageous for the company’s top management or do mid-level managers or employees at the field also benefit from a digitalized production processes?

As modern technologies keep moving ahead, the companies are compelled to continually implement innovations in order to remain competitive on the market. In this regard, IMC is not an exception. The innovation orientation of our company has been imprinted in its name after a rebranding that took place upon the occasion of the 10th anniversary of IMC in 2017. This way the abbreviation IMC got a completely new meaning, which now reflects our core values and priorities: Innovations Management Commitment. Thus, innovations are of a top priority to our company. Today IMC is one of the leaders in Ukrainian agriculture with regard to implementation of modern technologies. This enables us to effectively use productive, financial and human resources, which is extremely important in the face of a sharp shortage of qualified human capital on the Ukrainian labor market. 

Digitalization provides benefits to all levels of management, as well as to employees engaged directly in the production process. Top and middle management is thereby able to control business processes more precisely and to make decisions faster, while employees in the field benefit from simplification of performance reporting procedures.

Would you say there was any particular problem in your company that could have hardly been solved if a particular digital technology had not been introduced?

Yes. In particular, it has now been more than two years since the internal paper workflow at IMC was fully digitized, with all internal documents (such as business notes, orders and so on) being stored on the corporate e-portal. This innovation has simplified the process of decision-making for the company’s management. As a chief operational officer, I spend 80% of my working time out of the office – in the field and in the regions. With this solution in place, I can approve documents by applying my digital signature from any gadget, and this process does not require my physical presence in the office anymore.

Besides, we have managed to improve the efficiency of our cropping practices by means of digital technologies. The use of precision planters with seeding controllers allows us to save up to 5% of costly seeding material. Also, this year we plan to further implement Row-Sense and Row-Vision technologies that help to avoid the poaching damage of crops by machines during crop spraying. This way we expect to decrease such crop damages four times.

What are the main digital /precision agriculture technologies that have recently been adopted at IMC?

Among the numerous technologies implemented by IMC in the last two years, I would like to outline just some, most important of them. In particular, we have equipped all our fields with RTK (Real Time Kinematic)-stations whose signal gives us the exact field coordinates with an error margin of up to 2.5 cm. Also, we have equipped our agricultural machinery with self-driving and parallel-driving mechanisms that increased the efficiency of machinery use by 6-8% and led to significant fuel economy. The Row-Sense and Row-Vision solutions, mentioned before, help us to save minimum $3/hectare by avoiding crop damages during spraying.

In 2018, we developed crop yield maps for 43% of our farmland area, and we continue working in this direction this year. We conducted an agrochemical analysis for the area of 9,000 hectares and are now able to calculate the fertilizer input for this area more precisely. Regular satellite field monitoring allows us to timely identify vegetation problems on the fields, and the aerial survey performed by drones gives us an overview on crop development in vulnerable time periods.

What are the economic returns from implementing digital technologies at IMC?

IMC’ approach to technology implementation is rather pragmatic. Before introducing any digital technology, we analyze its feasibility from the profitability and cost efficiency perspectives. For example, it is easy to assess the economic efficiency of the abovementioned planters equipped with seed controllers if you consider that 70,000 hectares of IMC’s farmland area are under corn, the price of seed material per hectare of corn equals 120 euro, and the seed controllers allow saving 5% of seed material. The cost efficiency is just significant.

What are the costs of digitization?

Introduction of new technologies always requires expenditures of time and human resources in addition to financial expenses. One has to educate staff, reconfigure business processes and consider some efficiency decreases in the process of transition. All of this might be not only expensive, but also time-consuming. However, cost efficiency remains the main driver of innovations at IMC. According to our rules, the economic benefit from any technology should be at least 3 times higher than the costs borne for its implementation.

What are the biggest challenges that your company faces while introducing new technologies? How do the employees at the operational level react to the changes brought about by new technologies?

To tell that we do not face any problem would be a bit of a stretch here. I would primarily mention staff resistance as the major obstacle, since any disruption of the routine processes is a step outside a comfort zone for the employees. However, due to a critical mass of highly motivated employees who are willing to increase their performance through learning and share their proactive approach to new technologies with other colleagues, we manage to overcome such challenges. Based on our experience, resistance to change weakens once the employees see the benefits of the implemented innovations, which result in an increase of their efficiency and, accordingly, financial motivation.

How does IMC manage the collaboration with technology providers regarding ownership of Big Data collected by apps and programs at your company? Is data collected and analyzed exclusively inside of IMC or is this process outsourced to technology providers and, if yes, to what extent?

Some of the technologies, implemented and used by IMC, were developed by the company’s internal team of engineers and programmers, the others were purchased from the external providers. IMC’s corporate policy implies saving as much important data as possible on the company’s corporate servers. Therefore, most data is also analyzed by our staff internally. However, in some cases, we prefer outsourcing certain data analyses to external companies while protecting ourselves through confidentiality agreements. For instance, IMC entrusts specialized companies with soil analysis and recommendations on plant nutrition systems as their competences in this regard are stronger than ours.

How do you think digitalization will change the organization of the food chain? Do you expect that the buyers of IMC‘s products will take use of your digital excellence in some way?

The impact of digitalization on the food chain has been rising in the last years. This way, the companies can either implement new technologies in order to keep pace with current transformations and remain competitive or stay aside the market. The ones who benefit from digitalization most of all are customers and consumers or, in case of IMC, large grain traders or processors. New technologies, such as those in the area of seed selection, increase the quality of production simultaneously with cost efficiency and productivity improvements.

Do you think the benefits of digital technologies for the shareholders of IMC go beyond the profitability effects?

Financial performance is of top priority for the company’s shareholders and the major reason for implementing new technologies at IMC. However, the fact that business processes become more automated and transparent due to digitalization is also highly appreciated by them. In fact, corporate transparency is communicated to our shareholders as one of the main competitive advantages of IMC.

Larger Ukrainian farms mainly prefer agricultural machinery of Western manufacturers. What about digital technologies? Is there any evidence of successful Ukrainian or other Eastern European technology providers or start-ups?

Regarding hardware, Ukrainian agricultural companies still widely rely on foreign producers. However, with regard to software, in the last years there have emerged a number of highly competitive Ukrainian providers, offering solutions tailored to our domestic market at a better price. For instance, to store our geo-data, we use the web service developed by highly talented Ukrainian programmers from the city of Dnipro.

To what extent do modern technologies substitute the workforce at your company or, on the contrary, do they help to create new jobs? What changes do they require from the employees?

Indeed, new technologies substitute for workforce to some extent, primarily with respect to low-skill workers. However, the labor productivity indicators at our company still generally remain behind the results of agricultural producers from Western Europe or Northern America. At the same time, the requirements toward the staff at the production and management levels are changing. For example, nowadays, a machine operator has to be able to not only drive a tractor, but also to configure board computers, monitor automated field activities, conduct a basic agronomic quality control, maintain and repair agricultural machinery and so on. It is true, on the one hand, that digitized technologies are not able to replace the workforce completely. On the other hand, due to efficiency increases they entail, certain business operations now require lower numbers of workforce with higher skills.

Which innovations do you plan to implement at IMC in the nearest future?

At the moment, we are considering how to analyze big data using artificial intelligence. As the amount of information that our managers have to deal with is constantly increasing, such innovation would minimize the risk of missing important figures and be of great use in helping us to make right and timely decisions by screening the data and indicating the most relevant issues. This way, for example, it would become possible for our agronomists to compare the photos of our fields with certain samples and single out the priority areas that need to be monitored instead of monitoring all the supervised areas.

Thank you for your time!

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