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Farm innovation: Nine cases of Brazilian coffee growers☆
CHAPTER 7
Farm innovation: Nine cases of Brazilian coffee growers☆ Decio Zylbersztajna, Samuel Ribeiro Giordanob,c, Christiane Leles Rezende De Vitab,c a
Economics of Organization, School of Economics and Business/University of São Paulo, São Paulo, Brazil PENSA (Agribusiness Knowledge Center), São Paulo, Brazil c Università del Caffé, São Paulo, Brazil b
7.1 Introduction Innovation, as well as diffusion and adoption of technologies, are interconnected concepts. The predominant approach to innovation focuses on the development of technological trends. New paradigms emerge displacing existing industries and inducing the design of new business models. How do they emerge? How do new paradigms become dominant? How does competition trigger innovation? How do public policies affect technological cycles? These are questions contemplated in the literature. Issues of biotechnological revolution, nanotechnology, precision farming, and connectivity are examples of breakthroughs that have opened room for new business models. Diffusion and adoption of new technologies are concepts as relevant as innovation, as they add to the knowledge of how new cycles emerge adopting the views of the users. The focus is on how new technologies reach the end user and what the incentives are for users to substitute old technologies for new. Particularly relevant is to observe how the user’s perspectives of risk aversion and switching costs play in the process. When dealing with agriculture, the innovation-diffusion-adoption trilogy has gained particular relevance. Many authors in the field of agricultural development tried to reveal development difficulties by convincing farmers to adopt new technologies based on the agricultural revolution age.They blame persistent low productivity of factors to the lack of information provided to farmers, and the solution proposed was to bring only good news to farmers, which was expected to be sufficient to trigger development. This perspective has shown to be naive and simplistic, and leads to inefficient public policies. ☆
This chapter was produced as part of the Università del Caffè Brazil´s activities. The UdC Brazil was born in March of 2000 as a result of a partnership between PENSA (Agribusiness Knowledge Center) and illycaffè. More information: universidadedocafe.com.
Coffee Consumption and Industry Strategies in Brazil https://doi.org/10.1016/B978-0-12-814721-4.00006-8
© 2020 Elsevier Inc. All rights reserved.
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The technological evolution of scientific approaches brought new perspectives and received several influences; the first was showing the key role of prices in providing incentives for technological change. The observed dispersion of technological change trajectories and adoption of new technologies by farmers is consistent with different market conditions. In other words, profit maximization is consistent with different levels of technology adoption. Second, the work of Theodore Schultz on human capital stressed the relevance of farmers` education to triggering development, which brought a different perspective to public education policies. Third, in the 1980s, the resource-based approach opened room for new microanalytic studies that applied to technological innovation. The resource-based approach places attention on routines and tacit knowledge that emerges from the experience of agents. This chapter introduces a new perspective of innovation that is neglected in the literature, namely the microinnovation analysis. This aspect combines price perspective and the routine of economic agents. The price-induction approach of technological innovations embodies the role of price incentives, and the knowledge perspective brings the competence of agents to bend routines toward small, additive microinnovations that affect economic results. This work is the result of a 1-year study carried out with nine coffee growers in three Brazilian regions in 2016. Case studies have been developed based on a single protocol to identify microinnovations based on tacit knowledge of agents as well as to determine how the innovations have diffused among farmers. The main findings identified cost-saving and value-adding strategies, suggesting that microinnovation deserves further attention for studies of economics of organizations in agriculture. The chapter has five parts: the second section highlights the theoretical perspective, the third presents the research method, the fourth resumes the main findings in the case studies, and the fifth offers a conclusion.
7.2 Theoretical support The literature on farmer’s innovations follows studies on technological change and diffusion of technologies in agriculture that explored the effect of relative prices as determinants of incentives to promote new technologies. For instance, in the 1970s, Binswanger (1974) showed that technology change responds to scarcity, bending research efforts toward scarce production factors signaled by prices. Agricultural mechanization arises as a
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response to limited agricultural labor and fertilizers, just as the green revolution package responds to rises in land prices. Distortions of all sorts affect the process of technological change. The growth of the farm inputs corporations, and the concentration in that industry distorts signals provided by the price mechanism. Farmers have few technical package choices. The remaining question is how farmers respond to incentives directing innovative efforts to solve daily problems. Is farming activity passive concerning innovation, having been left with the single decision to choose among existing alternatives? Or do farmers have room to innovate at the farm level? The literature of adoption of farmer’s technologies shows a pronounced trend. The original influence of Theodore Schultz in the studies on the role of human capital (Schultz, 1961) has opened room for future studies on innovation based on knowledge. Second to the work of Griliches (1960) on technology diffusion, particularly studying the pattern of adoption of hybrid corn in the United States in the 1920s, his crucial contribution identifies two variables: namely the maximum level of adoption of the new technology as a substitution to traditional technology, and the rate of adoption of the innovation. The author shows that, the more profitable the latest technology, the more rapid its adoption and the higher the stabilization of the maximum level of adoption. The same idea inspired the work of Paiva (1971) in the 1970s, who explored the modernization of Brazilian farmers and the persistence of new and old technologies. The literature shows a convergence that the production of new technologies and the adoption of existing technologies by farmers result from price incentives, with profit maximization being the golden rule. This approach assumes the functioning of perfect markets and inexistence of transaction costs. Recent literature of transaction cost economics and the relevance of institutions introduced alternative approach views. Studies of a resource-based approach focus on the role of knowledge carried by economic agents. The fundamental idea is that routines are considered forms of tacit knowledge that cannot be packed and traded. Instead, economic agents develop it in the continuous activity of production. The two elements are critical to support the present study. First, prices and profit maximization matter; second, agents perform local activities that add to the innovation process. Our key proposition is that “farmers carry microinnovations embedded in the routines performed at the production site”; our aim is to reveal some examples adopting the multiple case study method.
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7.3 Method The method used to identify innovations and microinnovations related to coffee production were case studies. Nine case studies of Brazilian coffee growers were produced. Each case identifies elements to answer the research question about the existence of local microinnovations, their motivation, their diffusion, and the connected routines.The regions studied were Cerrado of Minas Gerais State, Matas de Minas/Matas do Espírito Santo, and southern region of Minas Gerais, which represent the most important coffee regions in Brazil. Case studies are widely used in management, economic studies, and also as a method of scientific research. It is a method of registration and research with different purposes. Depending on the target, their structure, size, format, and language will be different (Zylbersztajn et al., 2011). As explained by Farina (1997), the case study describes a real situation lived within an organization. Therefore, it is dated and linked to a set of circumstances both internal and external to the organization.The elaboration of a case depends on the use of the information objectively, accessible to the nonprofessional and, at the same time, organized according to a theoretical structure. In the same line, Zylbersztajn et al. (2011) stated that, whatever its purpose, a case study cannot dispense with three central elements: (A) A well-defined focus. (B) Theoretical structure. (C) Identification of the institutional setting. To meet these three core elements, the authors decided that each case study would have the following essential items in this research: its history involving characteristics of the farm, the producer and the organization, description of the innovation, the challenges faced, and the lessons of the case. Six steps were performed for each case: – Contact with experts to identify potential cases of innovation and microinnovation involving coffee production. – Selection of cases according to the identification of value-adding innovations and diffusion possibility. – Field trip and interviews. – Writing the cases. – Cross-reading. – Seminar of presentation and debate. The theoretical support is also based on the Agribusiness Systems Analysis (Goldberg, Zylbersztajn). For many years, agriculture innovation was discussed as a disconnected sector of the other sectors of the economy.
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There is a profit in adopting the systemic perspective to analyze innovation in agriculture, as a component of the system of organizations that represent the agribusiness system. This theoretical approach involves the role of support organizations, institutions, and the contractual arrangements among firms along the chains. The representation of Agribusiness system can be seen in Fig. 7.1: Based on the systemic view, the processes of innovation in agriculture can generate relevant propositions, such as: (A) Innovations occur in processes as well as products offered to the market. (B) Innovations occur in the context of organizational forms that connect producers-processors-distributors and final consumers. (C) Farmers interact with research institutions in coinnovation processes and to diffusion of innovations. There is an important process of local innovation that occurs within agricultural activity, which is influenced by the competence and educational level of producers that is little recognized. Farmers work daily, solving problems from practice, the exchange of information, and from experimentation, even if not supported by scientific methods. Observing the characteristics of each case, we classified the cases in categories related to their motivations and about their effects: Motivations: Cost-saving, value-adding strategies; improvement of commercialization; and improvement of specific technical operations. Impacts: Technical aspects and managerial aspects. These two categories were subdivided into subcategories get a better glimpse of the specificities of each case and the results obtained due to the innovation processes. These subcategories are: (1) Technical aspects of the case: 1.1 Environmental Impact Control. 1.2 Local Technical Diffusion. 1.3 Technical Diffusion by Rural Extension.
Fig. 7.1 Agribusiness system. (Source: Zylbersztajn, D., Neves, M.F., Caleman, S. (Org.), 2015. Gestão de Sistemas de Agronegócios. Atlas, São Paulo.)
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(2) Managerial aspects of the case: 2.1 Production Costs Effects. 2.2 Improvement in General Management of the Farm. 2.3 Value Addition to the Product. 2.4 Contracts and Commercialization. 2.5 Relations with Stakeholders. These categories and subcategories were not randomly chosen. They emerged during the process of elaboration of the nine cases and were chosen due to their connection with the basic question of this study. In the following section, the case studies will be described and analyzed.
7.4 Description of the case studies Nine case studies have been developed. Seven of them are focused on quality coffee growers that were considered innovators. They were in the main coffee regions of Minas Gerais, which were Southern, Cerrado (savannahs), Atlantic Forest, and the Mountains of the State of Espírito Santo. Two cases are about collective actions: one addresses technical and administrative costs of the farms, and the other targets property rights related to a system of Denomination of Origin “Cerrado Mineiro.” Each one of the cases illustrates elements that contribute to the enlightening of the varied aspects of microinnovation in coffee production and trade.
7.4.1 Case 1: “Da Serra” Farm, Botelhos—Southern Minas Gerais This a typical case in which the innovator is the owner-farmer who embodies the unique human capital associated with the innovation. His curiosity and resourcefulness are the drivers of continuous small and interconnected innovations. Mr. Mario Ferrari, the owner, is an agronomist whose skills have always been mechanics. His farm is located in a hilly region. One side is proper in climate and altitude for the coffee production, but on the other hand is highly labor intensive for the operations of cultivation and harvest. This situation pressures the production costs of coffee in all southern regions of Minas Gerais and anywhere coffee is grown in mountainous areas. This was the challenge that Mr. Ferrari faced every day. He always asked, “What can be improved here?” The profile of Mr. Ferrari, the kind of meticulous person who knows every bit of his farm and who is aware of any routine in the operations, contributes to form this kind of organized innovator.
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Among the many innovations identified in the case study, two were chosen that represent the profile of a resource-based innovator. First, the adaptation and improvement of equipment that Mr. Ferrari makes to control costs and increase the efficiency of specific operations in coffee production. They complement each other, leading to a direct effect on the costs. He deals with his tools in his garage, led by his extraordinary sensibility to make functional and straightforward tools. A semimechanized portable harvester is a simple machine adapted from an olive harvesting machine brought to him from Italy, which was enough for Mr. Ferrari to develop adaptations and turn it into a machine that could be used for coffee harvest. The effect of the new equipment was the improvement of labor efficiency controlling harvesting costs, keeping it at competitive levels. This is typical for open innovation. A separator of impurities developed by Mr. Ferrari leaves behind the traditional way of separating these impurities by hand, such as gravel, small stones, small branch pieces, and leaves from the beans. The old way is handwork-consuming. The process is quite simple, consisting of a pipe with a forced flux of air that separates the beans from the undesirable materials. Mr. Ferrari is not worried about patents or making money with his new tools. In his own words, he expressed this lack of preoccupation with property rights: “I want to be copied.” A second good example of microinnovation is represented by a series of mechanical devices made from junk and old equipment, such as a homemade Jeep and a big sweeper, which is a metal blade used in the coffee yard to revolve the coffee connected in the back of a tractor that saves the work of many men. This family of innovations results from Mr. Ferrari’s competence in dealing with mechanics. It also shows that Mr. Ferrari is an innovator. Cases of innovation like this cannot be replicated, due to the specific skills of the innovator. The progress of this farmer comes from small creative changes. When summed up, they result in an important effects, in this case, the operations, the ways of harvesting coffee, the ways of stacking the coffee in the yard, and the way in transporting goods around the farm. Teachings of the Case: • The problems faced by the farmers, mostly of costs and mainly pricedriven, are the incentives for innovation. • Thorough knowledge of the farm, the operations, the routines, the organization, and mechanical skills sums up to compose the profile of this highly successful innovator.
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• The capabilities of the innovator, in this particular case, creating different solutions to solve farming problems, are nonreplicable due to the specificities of the innovator. Motivation: Cost-saving and improvement of specific technical operations. Technical Aspects: Local technical diffusion and technical diffusion by rural extension. Managerial Aspects: production costs effects and improvement in the general management of the farm.
7.4.2 Case 2: Passeio e Lagoa Farms, Monte Belo, Southern Minas Gerais Adolfo Vieira is a nontraditional coffee grower. Despite his family’s involvement with coffee since the times of his great-grandfather in the 1889s, the generation of his father went to the University. His father is a dentist, and Adolfo is also a dentist. Nevertheless, life conducted Adolfo to lead the farm. Neither his father nor his brother wanted to administrate the farm. Leaving odontology behind, Mr.Vieira became a full-time coffee grower. He developed a different view of the product. He knew little about coffee, but he knew that there was value to be discovered in the production of mountain coffee. The production depended on two key factors, namely production with best agricultural practices and cost control due to the higher cost in the mountains, and the search for the bonuses in prices that the markets pay for quality coffees. In this way, Mr.Vieira had good relations with experts in the field production of coffee to solve the technical problems and, on the managerial side, he participated in quality awards, having initial success. This fact led him to develop relations with several organizations like the Brazilian Specialty Coffee Association, several specific coffee buyers, and with Klabin Paper Co. As can be seen, the features of this case are varied because they involve a nontraditional range of subjects related to innovation with a nontraditional coffee producer. His involvement with the association of special coffees made him president of the entity, and he opened relations with Agencies of Export Promotion. Being physically present at coffee fairs and festivals brought him closer to consumers. An example is a roaster from Japan that buys his coffee, posts pictures of the various stages of the crop in the store, and prints the portrait of Mr.Vieira on the packages. This is a typical case of microinnovation through a direct relationship with consumers and contracts. Mr.Vieira
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solved cost problems in the field and in the office with control and added value with his presence and contracts. The diffusion of these examples was done by Mr. Vieira himself in a kind of personal crusade to prove the feasibility of the coffee produced in the mountains, vis-à-vis, the coffee produced in new agricultural frontiers with flatlands. It can be easily done, he lectures, and is always invited to be a speaker at coffee events. It is a model that can be replicated by other producers because they have the elements and technical support to do so. In this case, there also appears the figure of co-innovation in association with Klabin Paper Co., and the Federal University of Lavras, which is looking for the development of paper packaging (Kraft paper) for small lots of ultra-special coffees. Mr.Vieira actively participated, opening the opportunity to have an interesting partnership that created value as it opened the market for differentiated packaging.The great thing was to offer different sizes of packages of 5, 10, 20, and 30 kg to different sizes of producers and consumers as well. Another innovation that must be mentioned is the long-term contract with coffee buyers. Nontraditional transactions again called the attention of Mr.Vieira to make this kind of contract. He understood the logic that could be profitable to him. Because the buyers accepted to pay the price above the market, he gave them a guarantee, through a contract, stating the attributes of quality, amount, and price for his coffee. As he is above the market prices and precisely knows his costs, he avoids the volatility of the market and guarantees his profit margins. In this case, it is observed that the innovation occurs along the whole productive chain. It begins in the field, but it goes mainly out of the farm limits. And it goes much beyond the traditional vision of technology associated with the innovation. In this case, the coffee grower replicates the examples of big companies and prints his name to his product associated with his brand. To Mr.Vieira it clear that his presence in the association and the actions taken there contribute to the improvement of the segment of special coffees. It generates positive externalities to the community of producers. The more, the better to have good producers. Teachings of the Case: • Innovation happens in big corporations, as well as in the small farms, as can be seen clearly in this case. • The proactivity of the innovator farmer is a characteristic associated with his success, and this success will be widespread through neighbors, the coffee community, and the technical assistance corps of the cooperative.
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• The innovation does not happen only on the farm. This farmer noted that, after taking care of the details of the production and the care in the postharvest operations to attain quality, he should continue and go beyond. He perceived the importance of looking for the final consumer. He surpassed one of the most complicated barriers of the Brazilian agriculture: the distance between the producer and the final consumer. Motivation: Cost-saving, value-adding strategy and improvement of commercialization. Technical Aspects: Local technical diffusion. Managerial Aspects: Production costs effects, value addition to the product, contracts and commercialization, relations with stakeholders.
7.4.3 Case 3: Caxambú Farm, Três Pontas, Southern Minas Gerais The case of Caxambú Farm, whose owner is Ms. Carmen Lucia Chaves de Brito, also known as Ucha, is an iconic example of the relevance of gender in the agribusiness system. She has a particular way to go in the relationship with the collaborators, neighbors, internees, researchers, and the local community in general. Out of these good relations, she makes the diffusion of knowledge through the involvement of the local community of producers. In this case, the innovation is addressed based on two dimensions: on the farm, and with the diffusion of knowledge and research innovation in coffee processing with a sensorial laboratory in the farm. The innovation generated in association with the Federal University of Lavras has several characteristics. First, the innovator has the advantages of being a pioneer in touch with new technologies, even if this knowledge is going to be widespread. Second, the proximity of the farm with a research center increases the probability of access to relevant information. Besides acting in research, the family also works to spread knowledge, opening their relationship with other producers and offering postharvesting courses about quality. The presence of a sensorial lab at the farm level is an open innovation bringing the scientists, students, and internees to work directly in local production and interacting with the producer. In this case, the property rights of the findings, despite being held at the farm, are not exclusively transferred to the farmer but rather shared with the research institution because it is a public entity. The exciting thing about the ongoing research is that they look for new coffee beverages through different ways of fermentation. This calls attention because it is also of interest to the coffee industry.
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The participative model of management can be seen in the daily activities of the farm showing that Ucha values the knowledge of the collaborators to solve problems and accepts their suggestions. The feminine hand is in the way the aesthetics; the beauty and ethics are conducted on the farm instead of only valuing the efficiency. Ucha supported the workers in solving problems like housing and schooling for their children as a way to attract and keep workers living on the farm in good conditions of comfort and education. One story showing the feminine hand in the management should be told: “Music in the Storehouse.” Once, a prospective German client, owner of a roasting company, visiting the farm passed the storehouse of the farm and listened Ucha’s ideas to install speakers playing classical music in the storehouse. She said that the beans suffer great stress, that they were a living being whose biology is in process and passing through several operations during the production. She explained they deserve and need a rest before going to the market. In this way, they’d be given moments of peace and harmony. Surprised, the gentleman asked Ucha for a moment to be alone there. After several minutes, Ucha went to storehouse looking for her guest. She found him sitting on the ground, listening to the music, in an emotional state. From then on, he never stopped buying coffee from Ucha’s farm. He returns every year to listen to the music in the storehouse. Teachings of the Case: • The activities carried on Caxambú Farm are innovative and lead to future possibilities, namely the competitive capability of the medium-scale coffee farms always happens when the farmer can add value associated with the quality attributes of the coffee and the social actions shared with the stakeholders. • The search for models of shared management that permit active participation of the collaborators is innovative at the farm level. Ucha’s competence hits the target as an innovative entrepreneur in a resource based model. She says, “The knowledge comes from the university; the research and the knowledge completes itself with the wisdom that comes from the workers.” • The call for the adoption of state-of-the-art technology in production and the “Out of the Box” possibilities are both innovations carried by Ucha on her farm. Motivation:Value-adding strategy and improvement of commercialization. Technical Aspects: Technical diffusion by neighbors. Managerial Aspects: Improvement in the general management of the farm, value addition to the product, contracts and commercialization, social relations with stakeholders.
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7.4.4 Case 4: São Paulo Farm, Patrocínio, Cerrado Minas Gerais The features of this case are of a technical nature involving weed management in the crop, partnership with research institutes, and the reduction in the use of inputs (agrochemicals and fertilizers) and water for irrigation.The manager and associate owner of the farm, Marcelo Montanari, is a restless agronomist. He is always searching for better systems to do things on the farm. He knows every centimeter of his farm because he runs through it every day with his collaborators and internees from the agronomy course that works with him. Marcelo likes to have agronomy students on his farm, making their undergraduate monographs. Sometimes he has even four students working on the farm. He supplies the student’s transport, food, and free access to the farm. They are advised by professors of the University who choose the research issues in a common base of interests with Marcelo. These actions are very innovative, and he lets them make the diffusion of the knowledge gained at the farm. He is never satisfied because he knows that perfection cannot be attained, and there is always room for improvement and for new things. The story behind the weed management started with the graduation of Marcelo at the Federal University of Lavras. He began his profession working with soybeans. In the zero-tillage system, he noticed the huge amount of organic matter that rested in the soil and the help that this biomass gave to the crop regarding nutrients: improvement of the fauna of the soils, increase in the porosity of the soil, maintenance of the humidity of the soil, and much more. He thought, “Why don’t we apply this knowledge in coffee production?” The regular way of managing weeds on coffee plantations was to apply herbicides to kill and dehydrate any form of vegetal species, keeping the soils in the middle of the coffee rows clean. Marcelo took a radical step by stopping the use of herbicides and just using mechanical cutting of the weeds, letting them deteriorate in the soil’s surface. Studying these proceedings with the help of professors of the University of Patrocínio, he knew that, theoretically, they would obtain moisture and elements to fertilize the soils, and generate a better environment for the coffee roots, improving productivity. But he had to prove it scientifically. The proof came with the help of methodology of a professor at Patrocínio University; the use of bioactivators released the nutrients from the biomass, making them available for the coffee plants. It was a vital addition to the process, making the release of nutrients and its availability to the soil and the coffee roots feasible.
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The reduction in the use of inputs, measured in three seasons, was a reduction of 43% in nitrogen, reduction of 54% in phosphorus, and reduction of 56% in potassium. All this, combined with a reduction of hours’ of tractor use and costs of the herbicides, resulted in a total cost reduction of 26.91%. Besides these advantages, there is the improvement of the environmental conditions of the farm, the growth of biodiversity, and the rational use of water. These are strong appeals to clients who value these issues in the final product. Marcelo receives many visits from neighbors and groups of farmers interested in the new practices. He opens his farm to anyone and does not hide any secrets because he knows these innovations will be rapidly adopted when the more conservative producers accept these techniques. Meanwhile, Marcelo, along with professors, researchers, internees, and inputs producers takes the first-comer advantages and the privilege of being a pioneer in this technology. As Marcelo says in his openly natural way, “We are here to produce the kind of coffee the client needs.” Teachings of the Case: • A radical change in the paradigm of the management of weed cover and the use of herbicides through microinnovations: – An innovative mind accepting radically new ways in managing and controlling weeds was necessary to implement this project. More than that, a person needs to be open-minded to understand the nature and origins of the processes that happen on the farm on a scientific basis, with the help of science and scientists. This leads to routines and changes in habits and traditional technology that affect the financial costs of the farm and sparing of natural resources in a very impressive way. – Technical knowledge and register. Technological knowledge, in this case, was not ready to be used. It takes time, patience, and experimentation to find the best results and the best ways to find better ways to apply the processes of weed management. Marcelo knows that, by his nature, he logs every single detail of what happens in the field, with the help of collaborators, internees, and, of course, his acute vision of the plantation. • The possibilities of spreading this knowledge are good because it results in reduction in the costs of production, an aim that every producer looks for.
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Motivation: Cost-saving and value-adding strategy. Technical Aspects: Environmental impact control and technical diffusion by rural extension. Managerial Aspects: Production costs effects, improvement in the general management of the farm, value addition to the product, contracts and commercialization.
7.4.5 Case 5: Jatobá Farm, Patrocínio, Cerrado Minas Gerais According to the scale pattern of the farms, Jatobá Farm is not a typical farm of the region. Its total area of 42 ha, of which 26 are occupied with coffee, does not allow for scale effects in production. The farm was a traditional property from the family, but the relatives who assumed ownership and control could not run it. Mr. Paulo Motta, a well-prepared economist, worked in Brasilia, the Federal Capital 300 km away from the farm. Despite being very open to new technology and innovation, he could not assume management of the farm, so he passed the responsibility to his son, Thiago Motta, who graduated in agronomy. Mr. Paulo formed his plantations with cultivar recommended by the technical assistance of the geneticists of a local research center—EPAMIG. He knew he did not have the scale to produce large quantities of coffee, so he decided to produce coffee seeds and sell them by the kilogram instead of producing only coffee commodity to be sold by the 60-kg bag. This was an innovation Mr. Motta saw was ahead of its time that was pursued by his son, Thiago, and is now a succeeding part of their business. Just after his graduation in agronomy from the University of Brasilia in the federal capital,Thiago Motta had to take over the family farm business because his father was involved with jobs in Brasilia. Thiago along with his collaborators, especially Amauri, the manager, open-mindedly started to develop a series of tools. By their observations, there were more efficient ways to work with the coffee in the yards with tools that were different in design and size than those traditionally used by all farms. It was an almost “tailor-made” production of these tools. The tools were simple, of low cost, and were created in the garage of the farm in an easy way. There were innovative tools to turn over the coffee (“Rodotigre” and “Vaquinha”), mounted to a motorcycle (biciamontoador) with pads in the back to revolve the coffee in the yard and others. Besides the microinnovations in the tools,Thiago extended these innovations to increase the production of certified and inspected coffee seeds, adding value to his product. They began to produce special coffees, in micro-lots, for special clients who looked for sustainable farms.
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Thiago followed the steps of his father in keeping tall native trees in the middle of the coffee plantation, giving a characteristic aspect to the farm. He very carefully managed the natural resources of the farm: the water, the soil, the biodiversity, the forest reserves, the springs, and lakes. These actions put him under the spotlight, and he was identified as a new age entrepreneur participating in contests promoted by an agency for the development of micro- and medium-sized companies. He received prizes, articles in magazines, and recognition for his deeds. Teachings of the Case: • The production of seeds to add value to the coffee in the field instead of common coffee, and the production and commercialization of roasted and ground coffee with self-brand in the Federal Capital-Brasília for HORECA (Hotels, Restaurants, and Catering) shows innovations induced by prices in a struggle to survive, despite the size of the farm. • Introducing sustainable production methods, which resulted in awards in environment management from support agencies, gave visibility to the farm, attracting clients who valued special coffees produced on a sustainable basis. These routine actions and the pursuit of different tools created conditions to develop new approaches as resource-based innovations. • Encouragement of creativity, an open dialogue, and good relationship with collaborators generates positive externalities for the business. Knowing the farm thoroughly was essential to discover the real needs of the operations, leading to the development of simple and efficient tools made locally. Again, this is an example of resource-based innovation, in this case, developed on the farm. Small innovations and changes in the routines have effects on the total results of the farm. Motivation: Value-adding strategy, improvement of commercialization, and improvement of specific technical operations. Technical Aspects: Environmental impact control. Managerial Aspects: Production costs control, improvement in the general management of the farm, value addition to the product, contracts, and commercialization.
7.4.6 Case 6: Denomination of origin Cerrado—DO Cerrado Mineiro This an atypical case with a focus on the collective and coordinated actions made by groups of leaders (farmers) of Cerrado Mineiro, aiming to add value for their members through differentiation of their products. There
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was a need for institutional support, such as law or rules of the game. At the beginning of the movement of regional protection of the brand Café do Cerrado, this group benefitted by the passing of a bill in the Brazilian Congress that regulated rights and dues relative to industrial property. Inside this bill was included a part that governs the Denomination of Origin. This group of producers is subdivided regionally in other counties into groups called “associations.” They started an effort to organize themselves in these associations, giving technical support and helping with marketing, merchandising actions, and representation of the farmers. There was some criticism by groups of traditional farmers, but they were quickly surpassed by the majority of people who had a new mentality and were opening a new agricultural frontier with no links to the past. From the first movements of winning awards for quality, the producer’s associations and cooperatives became more and more aware that, without a union, there would be no future for the coffee produced in the Cerrado region. The idea of having a brand, Café do Cerrado, had always been the target of some farmers. Starting the organization to obtain the indication of origin, they conquered this step in 1996. Advancing to the denomination of origin, a much more complicated set of rules, with rights and dues and the possibility of exclusion, they finally got the certificate published officially in December 2013. The result of this process was the conquest of the denomination of origin (DO) after 23 years of work, dedication, collective actions, and focus. The DO encompasses: • 55 cities. • A production area of 200 thousand hectares, of which 88.240 ha are within DO. • 939 farms and 833 farmers within DO. • 5 million bags of coffee are the total production of the region. • 12.5% of the national production and 25% of the production of the state Minas Gerais. Teachings of the Case: • The case shows that the collective search for results that add value to a group of producers by their product is worthwhile, despite all effort and energy spent in this search.To obtain these results, the producers needed to change their routines in production: the management of several key points in the farm like pesticides contamination, conservation of soil, water management, accountancy, costs control, care with hiring workers,
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concern with the quality of the coffee produced, and many more items that were innovatively introduced in their normal work. • Actions for the common well-being need strong leadership, able and dedicated people to carry on with projects like this. There is also a need for discipline of its participants to comply with the rules and obligations of the denomination of origin. • The innovation is the capability of working together toward a common goal and achieving it. Motivation:Value-adding strategy and improvement of commercialization. Technical Aspects: Environmental impact reduction, technical diffusion via rural extension. Managerial Aspects: Reduction in production costs, improvement in the general management of the farm, value addition to the product, improvement in contracts and commercialization, improvement in social relations with stakeholders.
7.4.7 Case 7: Conquista Farm, Venda Nova do ImigranteEspirito Santo The name of the small farm could not have been more significant: Conquest. This name is due to what these small farmers conquered with their work and sweat. The property rights of this farm; they bought it. They were not privileged by any government social program of access to land so prevalent in Brazil. This fact, by definition, is already innovative in Brazil in familiar production. The main features of this case are the power of the will to have access to land by market acquisition instead of agrarian reform. This family very clearly has the concept of property rights. This fact may have been a consequence of their work as sharecroppers in coffee plantations. There is also an example of resource-based innovation with the process of rationalization in the use of water for the preparation of the coffee. These small farmers knew they had to pulp their coffee to obtain quality and then get a better price for their product. The system SLAR (system of residuary water cleaning) was a result of a joint effort between research institutes and university (INCAPER, IFES, EPAMIG, UFV, and Embrapa Café) and, in this case, the work of this family to construct, install, and run the project. It consists of the reutilization of water in a closed system without compromising the quality of the coffee.There is a reduction in the volume of water (it can reach 90%) in the coffee processing significant to every farmer, especially to those who are in regions with a scarcity of water. This microinnovation is strategic in the global warming period and can easily be replicated and widespread.
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One characteristic of this project is its low cost and the fact that farmers can build their facilities. After processing the coffee, the disposable water is ready for use in fertilization-irrigation, meaning a further reduction of costs with fertilization and the rational use of natural-saving fertilizers. Teachings of the Case: • This case shows the importance of the role of the rural extension of research institutions for small farmers as a means to produce resource-based microinnovations with good results in costs. • It shows the contribution of science in a rational way of using water, avoiding pollution and saving fertilizers. • Low-cost and do-it-yourself projects can be easily replicable and diffused innovatively with the help of the rural extension and the university. Motivations: Cost-saving, value-adding strategy, and improvement of specific technical operations. Technical Aspects: Environmental impact control, local technical diffusion, technical diffusion by rural extension. Managerial Aspects: Production costs effects, improvement in the general management of the farm, value addition to the product, contracts, and commercialization.
7.4.8 Case 8: Educampo (Field Education) Matas de Minas—SEBRAE (Agency for support of small and medium companies and Specialty Coffee Assoc. MG) The region of the Atlantic rainforest in Minas Gerais has astounding landscapes of mountains and woods. But within this beauty hides problems that have caused problems for coffee production for more than a hundred years. With new technologies and innovation, namely the pulping process, producers finally surpassed the hidden problems of the region: an excess of humidity and clouds, leading to an impossibility of obtaining good quality coffee with natural sun-drying. With the new system, obtained with the use of pulping machines, the coffee region received an upgrade in quality but also an improvement in costs.The new processes implicated new costs, which were a problem for the coffee producers. A group of producers got together, united by friendship connections, and created an association of special coffees, The SCAMG, in 2001 in Manhuaçu, a county in the region.This group was looking for solutions for the low prices of the coffee paid by the market that year and also searching for solutions for improvement in costs caused by investments to produce quality coffee. The key was to sell better or reduce the cost.
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Exchanging experiences between them, they saw that they could reduce costs. But they needed a common base for comparisons. This was the seed that led them to unite efforts with a public agency in support of small and medium enterprises: project Educampo (Field education) Matas de Minas. This is an innovative collective action aimed at cost reduction, increasing their competitiveness, improvement of yields, quality, and ways of commercialization. This system provided information so they could make comparisons, among them verifying if their farm was above or below the group average. In this way, the farmer could make better decisions in the management to improve his performance. The key to the innovation was the widespread diffusion of all the knowledge accumulated and created in this collective among them, with the help of the technicians of the agency. The main features of the project are the participation of 11 farmers with 24 farms, an area of 1200 ha of coffee. The technical personnel of the agency produces monthly reports containing production costs and ranking of the farmers to compare themselves and their practices to achieve their results. There is a sharing of knowledge and an immediate diffusion of methods to one another. The great achievement of the project was the reduction of total costs per bag by 16% in the last biennium 2015/2016 and an increase of productivity in 22%. Teachings of the Case: • The collective action and the diffusion of knowledge are innovative, as well as the resource-based competences shared with one another. • The lack of property rights in knowledge creation is particularly relevant because the Educampo Project exists in other regions of the State of Minas Gerais, and each one of the projects uses their knowledge without concern in hiding or covering information. The producers discovered that there was strength in sharing and exchanging information on costs and practices instead of competing and hiding information from one another. Motivations: Cost-saving, value-adding strategy, and improvement of commercialization. Technical Aspects: Local technical diffusion, technical diffusion by rural extension. Managerial Aspects: Production costs effects, improvement in the general management of the farm, value addition to the product.
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7.4.9 Case 9: Retiro Farm, Manhuaçu, Atlantic Forest Minas Gerais Mr. Lage, the owner of Retiro Farm, learned the arts of developing and adapting equipment for the coffee farm in an innovative way with his father in law, in a resource-based competence, and also learned to share these improvements with anyone who came to his farm looking for the information. At the time, the machines played an essential role in the development and growth of the quality of the coffee produced on the farm. One of the great adaptations of tools was a coffee processor that could deal with different stages of maturation of coffee and process all of them. This family of farmers has routinely developed, adapted, or improved equipment that can make an even better preparation of the coffee in the postharvest. Innovating all of the time is the mote. The creativity of this family seems to pass from generation to generation contributing microinnovations to the coffee community. Their major contributions are: The pulper for dry coffee.This homemade solution is not present in the markets to sell. However, it can be replicated in the garage of any farm that has an able person to do it. The pulper to process naturally dried coffees or pulped cherries (CD) is machine developed on the farm and works for both products with excellent results. The bag lifter is an interesting device, also developed there, that permits the worker to lift the bag alone up to his head to make the coffee piles in the warehouses. Simple solutions made by wise people can solve many problems. Teachings of the Case: • When the farmers are looking very close at the functioning of the machines or just one operation on the farm, he can find a solution to a problem. • The management of business needs dedication to the activity and monitoring all the time. • To understand a problem increases the chances of finding a solution. • Formal education is not always a passport to creativity. Will and motivation act as master springs in many processes. Motivations:Value-adding strategy and improvement of specific technical operations. Technical Aspects: Local technical diffusion. Managerial Aspects:Value addition to the product.
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7.4.10 Resume of the categories of the cases According to the main motivations to develop innovation, the cases were grouped as: cost-saving, value-adding strategies, improvement of commercialization, and improvement of specific technical operations, as shown in Table 7.1. In the category about the technical aspects, the application of innovation in the reduction of environmental impacts (6 out of 9) was evident. The two other aspects observed were the ease with which the innovation could be diffused either through the neighbors (5 out of 9) or through the rural extension system (6 out of 9). Table 7.1 Main motivations of innovations. Cases
Cost saving
Value adding strategy
Commercialization
Technical operations
1. Da Serra Farm 2. Passeio e Lagoa Farms 3. Caxambu Farm 4. São Paulo Farm 5. Jatoba Farm 6. DO Cerrado 7. Conquista Farm 8. Educampo 9. Retiro Farm
Table 7.2 Technical aspects of the cases. Cases
1. Da Serra Farm 2. Passeio e Lagoa Farms 3. Caxambu Farm 4. São Paulo Farm 5. Jatoba Farm 6. DO Cerrado 7. Conquista Farm 8. Educampo 9. Retiro Farm
Environmental impact control
Local technical diffusion
Technical diffusion by rural extension
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Table 7.3 Managerial aspects of the cases. Cases
Value addition to Contracts and Production costs Improvement in the product commercialization effects general management of the farm
Relations with stakeholders
1. Da Serra Farm 2. Passeio e Lagoa Farms 3. Caxambu Farm 4. São Paulo Farm 5. Jatoba Farm 6. DO Cerrado 7. Conquista Farm 8. Educampo 9. Retiro Farm
The category improvement in general management of the farm emerged with strength along with Addition of Value to the Product for both subcategories (7 out of 9 cases), as well as the reduction in production costs and the improvement in contracts and commercialization for both subcategories (6 out of 9 cases), and, finally, improvement in social relations with stakeholders (4 out of 9 cases).The resume of this categorization can be seen in Tables 7.2 and 7.3.
7.5 Conclusions Innovations are central to the survival of modern agribusiness systems. The focus of this research was the less studied innovation process: the microinnovation in the farm. We found evidence to confirm that farmers have room to innovate at the farm level. The modalities of innovation identified in the cases were improvements in equipment; innovation in production, postharvest, and in marketing activities; and management of production and costs, as well collective actions. To answer the question about motivation, impacts, consequences of the innovations, and microinnovations identified in the nine cases, they were separated into categories and subcategories. The cases showed successful farmers with their microinnovations whose initial motivations were (in this order): value-adding strategies, cost-saving, improvement of commercialization, and improvement of specific technical operations.
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The positive consequences were: reduction of environmental effects, technical diffusion via neighbors, technical diffusion by rural extension, addition of value to the product, reduction in production costs, and the improvement in contracts and commercialization. In line with the theoretical support, in most of the cases, the innovation emerged from routines developed by farmers during their daily activities, such as forms of tacit knowledge that cannot be packed and traded. This occurs due to specific competencies of innovator, as was shown in the cases of Da Serra Farm, Passeio e Lagoa Farms, Caxambu farm, São Paulo Farm, Jatoba Farm, and Retiro Farm. The innovation can also be the result of a partnership with research institutions, as in the cases of Caxambu Farm and Conquista Farm, or as a result of collective actions as shown in the cases of Denomination of Origin of Cerrado and Educampo. The sum of the knowledge gained over time, sometimes concentrated in the agricultural producer and sometimes present in the routines developed within the farm, represents a generator of useful and value-generating knowledge. Innovation has cumulative effects; it affects the routines of production at the farm level, and it can affect other agents of the agribusiness system. It is a continuous process, and it cannot be ignored.
7.5.1 Recommendations for researchers The real problems faced by producers on a day-to-day basis represent incentives for innovative actions. A partnership among educational institutions, researchers, and extensions in a collaborative way with farmers can generate relevant results, mainly for small rural properties. There is a lack of studies that focus on the effects of microinnovations that happen from everyday experience, inventiveness, and an ability to solve problems.
7.5.2 Recommendations for farmers and companies Rural producers working in the same region may find different solutions to the problems they face. The skills that each producer brings in their baggage allow them to discover different ways of dealing with similar problems. Dedication to work and personal talent are differential in many cases. Not everyone has skills in mechanics, for example, however, many solutions can be found on the farm.
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Farmers, when not competing with neighbors, only tend to gain from sharing information about practices and costs. Good relationships with employees and encouraging creativity can generate positive externalities for your business, sometimes at a very low cost. The search for value aggregation in agribusiness is not trivial. It should be studied and rigorously planned.The bigger solution is not always the best in efficiency. Efficiency gains come from a sustainable organization on the economic, social, and environmental tripod.
References Binswanger, H., 1974. The measurement of technical change biases with many factors of production. Am. Econ. Rev. 64 (6), 964–976. Farina, E., 1997. Coord. Estudos de Caso em Agribusiness. PENSA, Pioneira, São Paulo. Griliches, Zvi., 1960. Hybrid corn and the economics of innovations. Science (New Series) 132 (3422), 275–280. Paiva, R.M., 1971. Modernização e Dualismo Tecnológico na Agricultura. Pesquisa e Planejamento Econômico.V1, dezembro. Schultz, T.W., 1961. Investment in human capital. Am. Econ. Rev. 51 (1), 1–17. Zylbersztajn, D., Giordano, S.R., Almeida, L.F., 2011. Projeto Estudos de Casos BNDES. PENSA.
Further reading Zylbersztajn, D., 1996. Governance structures and agribusiness coordination: a transaction cost economics based approach. Res. Domest. Int. Agribus. Manag. Res. Annu. 12, 245–310. Zylbersztajn, D., Neves, M.F., Caleman, S., Org. 2015. Gestão de Sistemas de Agronegócios. Atlas, São Paulo.
Farm innovation: Nine cases of Brazilian coffee growers☆ Decio Zylbersztajna, Samuel Ribeiro Giordanob,c, Christiane Leles Rezende De Vitab,c a
Economics of Organization, School of Economics and Business/University of São Paulo, São Paulo, Brazil PENSA (Agribusiness Knowledge Center), São Paulo, Brazil c Università del Caffé, São Paulo, Brazil b
7.1 Introduction Innovation, as well as diffusion and adoption of technologies, are interconnected concepts. The predominant approach to innovation focuses on the development of technological trends. New paradigms emerge displacing existing industries and inducing the design of new business models. How do they emerge? How do new paradigms become dominant? How does competition trigger innovation? How do public policies affect technological cycles? These are questions contemplated in the literature. Issues of biotechnological revolution, nanotechnology, precision farming, and connectivity are examples of breakthroughs that have opened room for new business models. Diffusion and adoption of new technologies are concepts as relevant as innovation, as they add to the knowledge of how new cycles emerge adopting the views of the users. The focus is on how new technologies reach the end user and what the incentives are for users to substitute old technologies for new. Particularly relevant is to observe how the user’s perspectives of risk aversion and switching costs play in the process. When dealing with agriculture, the innovation-diffusion-adoption trilogy has gained particular relevance. Many authors in the field of agricultural development tried to reveal development difficulties by convincing farmers to adopt new technologies based on the agricultural revolution age.They blame persistent low productivity of factors to the lack of information provided to farmers, and the solution proposed was to bring only good news to farmers, which was expected to be sufficient to trigger development. This perspective has shown to be naive and simplistic, and leads to inefficient public policies. ☆
This chapter was produced as part of the Università del Caffè Brazil´s activities. The UdC Brazil was born in March of 2000 as a result of a partnership between PENSA (Agribusiness Knowledge Center) and illycaffè. More information: universidadedocafe.com.
Coffee Consumption and Industry Strategies in Brazil https://doi.org/10.1016/B978-0-12-814721-4.00006-8
© 2020 Elsevier Inc. All rights reserved.
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The technological evolution of scientific approaches brought new perspectives and received several influences; the first was showing the key role of prices in providing incentives for technological change. The observed dispersion of technological change trajectories and adoption of new technologies by farmers is consistent with different market conditions. In other words, profit maximization is consistent with different levels of technology adoption. Second, the work of Theodore Schultz on human capital stressed the relevance of farmers` education to triggering development, which brought a different perspective to public education policies. Third, in the 1980s, the resource-based approach opened room for new microanalytic studies that applied to technological innovation. The resource-based approach places attention on routines and tacit knowledge that emerges from the experience of agents. This chapter introduces a new perspective of innovation that is neglected in the literature, namely the microinnovation analysis. This aspect combines price perspective and the routine of economic agents. The price-induction approach of technological innovations embodies the role of price incentives, and the knowledge perspective brings the competence of agents to bend routines toward small, additive microinnovations that affect economic results. This work is the result of a 1-year study carried out with nine coffee growers in three Brazilian regions in 2016. Case studies have been developed based on a single protocol to identify microinnovations based on tacit knowledge of agents as well as to determine how the innovations have diffused among farmers. The main findings identified cost-saving and value-adding strategies, suggesting that microinnovation deserves further attention for studies of economics of organizations in agriculture. The chapter has five parts: the second section highlights the theoretical perspective, the third presents the research method, the fourth resumes the main findings in the case studies, and the fifth offers a conclusion.
7.2 Theoretical support The literature on farmer’s innovations follows studies on technological change and diffusion of technologies in agriculture that explored the effect of relative prices as determinants of incentives to promote new technologies. For instance, in the 1970s, Binswanger (1974) showed that technology change responds to scarcity, bending research efforts toward scarce production factors signaled by prices. Agricultural mechanization arises as a
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response to limited agricultural labor and fertilizers, just as the green revolution package responds to rises in land prices. Distortions of all sorts affect the process of technological change. The growth of the farm inputs corporations, and the concentration in that industry distorts signals provided by the price mechanism. Farmers have few technical package choices. The remaining question is how farmers respond to incentives directing innovative efforts to solve daily problems. Is farming activity passive concerning innovation, having been left with the single decision to choose among existing alternatives? Or do farmers have room to innovate at the farm level? The literature of adoption of farmer’s technologies shows a pronounced trend. The original influence of Theodore Schultz in the studies on the role of human capital (Schultz, 1961) has opened room for future studies on innovation based on knowledge. Second to the work of Griliches (1960) on technology diffusion, particularly studying the pattern of adoption of hybrid corn in the United States in the 1920s, his crucial contribution identifies two variables: namely the maximum level of adoption of the new technology as a substitution to traditional technology, and the rate of adoption of the innovation. The author shows that, the more profitable the latest technology, the more rapid its adoption and the higher the stabilization of the maximum level of adoption. The same idea inspired the work of Paiva (1971) in the 1970s, who explored the modernization of Brazilian farmers and the persistence of new and old technologies. The literature shows a convergence that the production of new technologies and the adoption of existing technologies by farmers result from price incentives, with profit maximization being the golden rule. This approach assumes the functioning of perfect markets and inexistence of transaction costs. Recent literature of transaction cost economics and the relevance of institutions introduced alternative approach views. Studies of a resource-based approach focus on the role of knowledge carried by economic agents. The fundamental idea is that routines are considered forms of tacit knowledge that cannot be packed and traded. Instead, economic agents develop it in the continuous activity of production. The two elements are critical to support the present study. First, prices and profit maximization matter; second, agents perform local activities that add to the innovation process. Our key proposition is that “farmers carry microinnovations embedded in the routines performed at the production site”; our aim is to reveal some examples adopting the multiple case study method.
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7.3 Method The method used to identify innovations and microinnovations related to coffee production were case studies. Nine case studies of Brazilian coffee growers were produced. Each case identifies elements to answer the research question about the existence of local microinnovations, their motivation, their diffusion, and the connected routines.The regions studied were Cerrado of Minas Gerais State, Matas de Minas/Matas do Espírito Santo, and southern region of Minas Gerais, which represent the most important coffee regions in Brazil. Case studies are widely used in management, economic studies, and also as a method of scientific research. It is a method of registration and research with different purposes. Depending on the target, their structure, size, format, and language will be different (Zylbersztajn et al., 2011). As explained by Farina (1997), the case study describes a real situation lived within an organization. Therefore, it is dated and linked to a set of circumstances both internal and external to the organization.The elaboration of a case depends on the use of the information objectively, accessible to the nonprofessional and, at the same time, organized according to a theoretical structure. In the same line, Zylbersztajn et al. (2011) stated that, whatever its purpose, a case study cannot dispense with three central elements: (A) A well-defined focus. (B) Theoretical structure. (C) Identification of the institutional setting. To meet these three core elements, the authors decided that each case study would have the following essential items in this research: its history involving characteristics of the farm, the producer and the organization, description of the innovation, the challenges faced, and the lessons of the case. Six steps were performed for each case: – Contact with experts to identify potential cases of innovation and microinnovation involving coffee production. – Selection of cases according to the identification of value-adding innovations and diffusion possibility. – Field trip and interviews. – Writing the cases. – Cross-reading. – Seminar of presentation and debate. The theoretical support is also based on the Agribusiness Systems Analysis (Goldberg, Zylbersztajn). For many years, agriculture innovation was discussed as a disconnected sector of the other sectors of the economy.
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There is a profit in adopting the systemic perspective to analyze innovation in agriculture, as a component of the system of organizations that represent the agribusiness system. This theoretical approach involves the role of support organizations, institutions, and the contractual arrangements among firms along the chains. The representation of Agribusiness system can be seen in Fig. 7.1: Based on the systemic view, the processes of innovation in agriculture can generate relevant propositions, such as: (A) Innovations occur in processes as well as products offered to the market. (B) Innovations occur in the context of organizational forms that connect producers-processors-distributors and final consumers. (C) Farmers interact with research institutions in coinnovation processes and to diffusion of innovations. There is an important process of local innovation that occurs within agricultural activity, which is influenced by the competence and educational level of producers that is little recognized. Farmers work daily, solving problems from practice, the exchange of information, and from experimentation, even if not supported by scientific methods. Observing the characteristics of each case, we classified the cases in categories related to their motivations and about their effects: Motivations: Cost-saving, value-adding strategies; improvement of commercialization; and improvement of specific technical operations. Impacts: Technical aspects and managerial aspects. These two categories were subdivided into subcategories get a better glimpse of the specificities of each case and the results obtained due to the innovation processes. These subcategories are: (1) Technical aspects of the case: 1.1 Environmental Impact Control. 1.2 Local Technical Diffusion. 1.3 Technical Diffusion by Rural Extension.
Fig. 7.1 Agribusiness system. (Source: Zylbersztajn, D., Neves, M.F., Caleman, S. (Org.), 2015. Gestão de Sistemas de Agronegócios. Atlas, São Paulo.)
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(2) Managerial aspects of the case: 2.1 Production Costs Effects. 2.2 Improvement in General Management of the Farm. 2.3 Value Addition to the Product. 2.4 Contracts and Commercialization. 2.5 Relations with Stakeholders. These categories and subcategories were not randomly chosen. They emerged during the process of elaboration of the nine cases and were chosen due to their connection with the basic question of this study. In the following section, the case studies will be described and analyzed.
7.4 Description of the case studies Nine case studies have been developed. Seven of them are focused on quality coffee growers that were considered innovators. They were in the main coffee regions of Minas Gerais, which were Southern, Cerrado (savannahs), Atlantic Forest, and the Mountains of the State of Espírito Santo. Two cases are about collective actions: one addresses technical and administrative costs of the farms, and the other targets property rights related to a system of Denomination of Origin “Cerrado Mineiro.” Each one of the cases illustrates elements that contribute to the enlightening of the varied aspects of microinnovation in coffee production and trade.
7.4.1 Case 1: “Da Serra” Farm, Botelhos—Southern Minas Gerais This a typical case in which the innovator is the owner-farmer who embodies the unique human capital associated with the innovation. His curiosity and resourcefulness are the drivers of continuous small and interconnected innovations. Mr. Mario Ferrari, the owner, is an agronomist whose skills have always been mechanics. His farm is located in a hilly region. One side is proper in climate and altitude for the coffee production, but on the other hand is highly labor intensive for the operations of cultivation and harvest. This situation pressures the production costs of coffee in all southern regions of Minas Gerais and anywhere coffee is grown in mountainous areas. This was the challenge that Mr. Ferrari faced every day. He always asked, “What can be improved here?” The profile of Mr. Ferrari, the kind of meticulous person who knows every bit of his farm and who is aware of any routine in the operations, contributes to form this kind of organized innovator.
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Among the many innovations identified in the case study, two were chosen that represent the profile of a resource-based innovator. First, the adaptation and improvement of equipment that Mr. Ferrari makes to control costs and increase the efficiency of specific operations in coffee production. They complement each other, leading to a direct effect on the costs. He deals with his tools in his garage, led by his extraordinary sensibility to make functional and straightforward tools. A semimechanized portable harvester is a simple machine adapted from an olive harvesting machine brought to him from Italy, which was enough for Mr. Ferrari to develop adaptations and turn it into a machine that could be used for coffee harvest. The effect of the new equipment was the improvement of labor efficiency controlling harvesting costs, keeping it at competitive levels. This is typical for open innovation. A separator of impurities developed by Mr. Ferrari leaves behind the traditional way of separating these impurities by hand, such as gravel, small stones, small branch pieces, and leaves from the beans. The old way is handwork-consuming. The process is quite simple, consisting of a pipe with a forced flux of air that separates the beans from the undesirable materials. Mr. Ferrari is not worried about patents or making money with his new tools. In his own words, he expressed this lack of preoccupation with property rights: “I want to be copied.” A second good example of microinnovation is represented by a series of mechanical devices made from junk and old equipment, such as a homemade Jeep and a big sweeper, which is a metal blade used in the coffee yard to revolve the coffee connected in the back of a tractor that saves the work of many men. This family of innovations results from Mr. Ferrari’s competence in dealing with mechanics. It also shows that Mr. Ferrari is an innovator. Cases of innovation like this cannot be replicated, due to the specific skills of the innovator. The progress of this farmer comes from small creative changes. When summed up, they result in an important effects, in this case, the operations, the ways of harvesting coffee, the ways of stacking the coffee in the yard, and the way in transporting goods around the farm. Teachings of the Case: • The problems faced by the farmers, mostly of costs and mainly pricedriven, are the incentives for innovation. • Thorough knowledge of the farm, the operations, the routines, the organization, and mechanical skills sums up to compose the profile of this highly successful innovator.
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• The capabilities of the innovator, in this particular case, creating different solutions to solve farming problems, are nonreplicable due to the specificities of the innovator. Motivation: Cost-saving and improvement of specific technical operations. Technical Aspects: Local technical diffusion and technical diffusion by rural extension. Managerial Aspects: production costs effects and improvement in the general management of the farm.
7.4.2 Case 2: Passeio e Lagoa Farms, Monte Belo, Southern Minas Gerais Adolfo Vieira is a nontraditional coffee grower. Despite his family’s involvement with coffee since the times of his great-grandfather in the 1889s, the generation of his father went to the University. His father is a dentist, and Adolfo is also a dentist. Nevertheless, life conducted Adolfo to lead the farm. Neither his father nor his brother wanted to administrate the farm. Leaving odontology behind, Mr.Vieira became a full-time coffee grower. He developed a different view of the product. He knew little about coffee, but he knew that there was value to be discovered in the production of mountain coffee. The production depended on two key factors, namely production with best agricultural practices and cost control due to the higher cost in the mountains, and the search for the bonuses in prices that the markets pay for quality coffees. In this way, Mr.Vieira had good relations with experts in the field production of coffee to solve the technical problems and, on the managerial side, he participated in quality awards, having initial success. This fact led him to develop relations with several organizations like the Brazilian Specialty Coffee Association, several specific coffee buyers, and with Klabin Paper Co. As can be seen, the features of this case are varied because they involve a nontraditional range of subjects related to innovation with a nontraditional coffee producer. His involvement with the association of special coffees made him president of the entity, and he opened relations with Agencies of Export Promotion. Being physically present at coffee fairs and festivals brought him closer to consumers. An example is a roaster from Japan that buys his coffee, posts pictures of the various stages of the crop in the store, and prints the portrait of Mr.Vieira on the packages. This is a typical case of microinnovation through a direct relationship with consumers and contracts. Mr.Vieira
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solved cost problems in the field and in the office with control and added value with his presence and contracts. The diffusion of these examples was done by Mr. Vieira himself in a kind of personal crusade to prove the feasibility of the coffee produced in the mountains, vis-à-vis, the coffee produced in new agricultural frontiers with flatlands. It can be easily done, he lectures, and is always invited to be a speaker at coffee events. It is a model that can be replicated by other producers because they have the elements and technical support to do so. In this case, there also appears the figure of co-innovation in association with Klabin Paper Co., and the Federal University of Lavras, which is looking for the development of paper packaging (Kraft paper) for small lots of ultra-special coffees. Mr.Vieira actively participated, opening the opportunity to have an interesting partnership that created value as it opened the market for differentiated packaging.The great thing was to offer different sizes of packages of 5, 10, 20, and 30 kg to different sizes of producers and consumers as well. Another innovation that must be mentioned is the long-term contract with coffee buyers. Nontraditional transactions again called the attention of Mr.Vieira to make this kind of contract. He understood the logic that could be profitable to him. Because the buyers accepted to pay the price above the market, he gave them a guarantee, through a contract, stating the attributes of quality, amount, and price for his coffee. As he is above the market prices and precisely knows his costs, he avoids the volatility of the market and guarantees his profit margins. In this case, it is observed that the innovation occurs along the whole productive chain. It begins in the field, but it goes mainly out of the farm limits. And it goes much beyond the traditional vision of technology associated with the innovation. In this case, the coffee grower replicates the examples of big companies and prints his name to his product associated with his brand. To Mr.Vieira it clear that his presence in the association and the actions taken there contribute to the improvement of the segment of special coffees. It generates positive externalities to the community of producers. The more, the better to have good producers. Teachings of the Case: • Innovation happens in big corporations, as well as in the small farms, as can be seen clearly in this case. • The proactivity of the innovator farmer is a characteristic associated with his success, and this success will be widespread through neighbors, the coffee community, and the technical assistance corps of the cooperative.
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• The innovation does not happen only on the farm. This farmer noted that, after taking care of the details of the production and the care in the postharvest operations to attain quality, he should continue and go beyond. He perceived the importance of looking for the final consumer. He surpassed one of the most complicated barriers of the Brazilian agriculture: the distance between the producer and the final consumer. Motivation: Cost-saving, value-adding strategy and improvement of commercialization. Technical Aspects: Local technical diffusion. Managerial Aspects: Production costs effects, value addition to the product, contracts and commercialization, relations with stakeholders.
7.4.3 Case 3: Caxambú Farm, Três Pontas, Southern Minas Gerais The case of Caxambú Farm, whose owner is Ms. Carmen Lucia Chaves de Brito, also known as Ucha, is an iconic example of the relevance of gender in the agribusiness system. She has a particular way to go in the relationship with the collaborators, neighbors, internees, researchers, and the local community in general. Out of these good relations, she makes the diffusion of knowledge through the involvement of the local community of producers. In this case, the innovation is addressed based on two dimensions: on the farm, and with the diffusion of knowledge and research innovation in coffee processing with a sensorial laboratory in the farm. The innovation generated in association with the Federal University of Lavras has several characteristics. First, the innovator has the advantages of being a pioneer in touch with new technologies, even if this knowledge is going to be widespread. Second, the proximity of the farm with a research center increases the probability of access to relevant information. Besides acting in research, the family also works to spread knowledge, opening their relationship with other producers and offering postharvesting courses about quality. The presence of a sensorial lab at the farm level is an open innovation bringing the scientists, students, and internees to work directly in local production and interacting with the producer. In this case, the property rights of the findings, despite being held at the farm, are not exclusively transferred to the farmer but rather shared with the research institution because it is a public entity. The exciting thing about the ongoing research is that they look for new coffee beverages through different ways of fermentation. This calls attention because it is also of interest to the coffee industry.
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The participative model of management can be seen in the daily activities of the farm showing that Ucha values the knowledge of the collaborators to solve problems and accepts their suggestions. The feminine hand is in the way the aesthetics; the beauty and ethics are conducted on the farm instead of only valuing the efficiency. Ucha supported the workers in solving problems like housing and schooling for their children as a way to attract and keep workers living on the farm in good conditions of comfort and education. One story showing the feminine hand in the management should be told: “Music in the Storehouse.” Once, a prospective German client, owner of a roasting company, visiting the farm passed the storehouse of the farm and listened Ucha’s ideas to install speakers playing classical music in the storehouse. She said that the beans suffer great stress, that they were a living being whose biology is in process and passing through several operations during the production. She explained they deserve and need a rest before going to the market. In this way, they’d be given moments of peace and harmony. Surprised, the gentleman asked Ucha for a moment to be alone there. After several minutes, Ucha went to storehouse looking for her guest. She found him sitting on the ground, listening to the music, in an emotional state. From then on, he never stopped buying coffee from Ucha’s farm. He returns every year to listen to the music in the storehouse. Teachings of the Case: • The activities carried on Caxambú Farm are innovative and lead to future possibilities, namely the competitive capability of the medium-scale coffee farms always happens when the farmer can add value associated with the quality attributes of the coffee and the social actions shared with the stakeholders. • The search for models of shared management that permit active participation of the collaborators is innovative at the farm level. Ucha’s competence hits the target as an innovative entrepreneur in a resource based model. She says, “The knowledge comes from the university; the research and the knowledge completes itself with the wisdom that comes from the workers.” • The call for the adoption of state-of-the-art technology in production and the “Out of the Box” possibilities are both innovations carried by Ucha on her farm. Motivation:Value-adding strategy and improvement of commercialization. Technical Aspects: Technical diffusion by neighbors. Managerial Aspects: Improvement in the general management of the farm, value addition to the product, contracts and commercialization, social relations with stakeholders.
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7.4.4 Case 4: São Paulo Farm, Patrocínio, Cerrado Minas Gerais The features of this case are of a technical nature involving weed management in the crop, partnership with research institutes, and the reduction in the use of inputs (agrochemicals and fertilizers) and water for irrigation.The manager and associate owner of the farm, Marcelo Montanari, is a restless agronomist. He is always searching for better systems to do things on the farm. He knows every centimeter of his farm because he runs through it every day with his collaborators and internees from the agronomy course that works with him. Marcelo likes to have agronomy students on his farm, making their undergraduate monographs. Sometimes he has even four students working on the farm. He supplies the student’s transport, food, and free access to the farm. They are advised by professors of the University who choose the research issues in a common base of interests with Marcelo. These actions are very innovative, and he lets them make the diffusion of the knowledge gained at the farm. He is never satisfied because he knows that perfection cannot be attained, and there is always room for improvement and for new things. The story behind the weed management started with the graduation of Marcelo at the Federal University of Lavras. He began his profession working with soybeans. In the zero-tillage system, he noticed the huge amount of organic matter that rested in the soil and the help that this biomass gave to the crop regarding nutrients: improvement of the fauna of the soils, increase in the porosity of the soil, maintenance of the humidity of the soil, and much more. He thought, “Why don’t we apply this knowledge in coffee production?” The regular way of managing weeds on coffee plantations was to apply herbicides to kill and dehydrate any form of vegetal species, keeping the soils in the middle of the coffee rows clean. Marcelo took a radical step by stopping the use of herbicides and just using mechanical cutting of the weeds, letting them deteriorate in the soil’s surface. Studying these proceedings with the help of professors of the University of Patrocínio, he knew that, theoretically, they would obtain moisture and elements to fertilize the soils, and generate a better environment for the coffee roots, improving productivity. But he had to prove it scientifically. The proof came with the help of methodology of a professor at Patrocínio University; the use of bioactivators released the nutrients from the biomass, making them available for the coffee plants. It was a vital addition to the process, making the release of nutrients and its availability to the soil and the coffee roots feasible.
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The reduction in the use of inputs, measured in three seasons, was a reduction of 43% in nitrogen, reduction of 54% in phosphorus, and reduction of 56% in potassium. All this, combined with a reduction of hours’ of tractor use and costs of the herbicides, resulted in a total cost reduction of 26.91%. Besides these advantages, there is the improvement of the environmental conditions of the farm, the growth of biodiversity, and the rational use of water. These are strong appeals to clients who value these issues in the final product. Marcelo receives many visits from neighbors and groups of farmers interested in the new practices. He opens his farm to anyone and does not hide any secrets because he knows these innovations will be rapidly adopted when the more conservative producers accept these techniques. Meanwhile, Marcelo, along with professors, researchers, internees, and inputs producers takes the first-comer advantages and the privilege of being a pioneer in this technology. As Marcelo says in his openly natural way, “We are here to produce the kind of coffee the client needs.” Teachings of the Case: • A radical change in the paradigm of the management of weed cover and the use of herbicides through microinnovations: – An innovative mind accepting radically new ways in managing and controlling weeds was necessary to implement this project. More than that, a person needs to be open-minded to understand the nature and origins of the processes that happen on the farm on a scientific basis, with the help of science and scientists. This leads to routines and changes in habits and traditional technology that affect the financial costs of the farm and sparing of natural resources in a very impressive way. – Technical knowledge and register. Technological knowledge, in this case, was not ready to be used. It takes time, patience, and experimentation to find the best results and the best ways to find better ways to apply the processes of weed management. Marcelo knows that, by his nature, he logs every single detail of what happens in the field, with the help of collaborators, internees, and, of course, his acute vision of the plantation. • The possibilities of spreading this knowledge are good because it results in reduction in the costs of production, an aim that every producer looks for.
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Motivation: Cost-saving and value-adding strategy. Technical Aspects: Environmental impact control and technical diffusion by rural extension. Managerial Aspects: Production costs effects, improvement in the general management of the farm, value addition to the product, contracts and commercialization.
7.4.5 Case 5: Jatobá Farm, Patrocínio, Cerrado Minas Gerais According to the scale pattern of the farms, Jatobá Farm is not a typical farm of the region. Its total area of 42 ha, of which 26 are occupied with coffee, does not allow for scale effects in production. The farm was a traditional property from the family, but the relatives who assumed ownership and control could not run it. Mr. Paulo Motta, a well-prepared economist, worked in Brasilia, the Federal Capital 300 km away from the farm. Despite being very open to new technology and innovation, he could not assume management of the farm, so he passed the responsibility to his son, Thiago Motta, who graduated in agronomy. Mr. Paulo formed his plantations with cultivar recommended by the technical assistance of the geneticists of a local research center—EPAMIG. He knew he did not have the scale to produce large quantities of coffee, so he decided to produce coffee seeds and sell them by the kilogram instead of producing only coffee commodity to be sold by the 60-kg bag. This was an innovation Mr. Motta saw was ahead of its time that was pursued by his son, Thiago, and is now a succeeding part of their business. Just after his graduation in agronomy from the University of Brasilia in the federal capital,Thiago Motta had to take over the family farm business because his father was involved with jobs in Brasilia. Thiago along with his collaborators, especially Amauri, the manager, open-mindedly started to develop a series of tools. By their observations, there were more efficient ways to work with the coffee in the yards with tools that were different in design and size than those traditionally used by all farms. It was an almost “tailor-made” production of these tools. The tools were simple, of low cost, and were created in the garage of the farm in an easy way. There were innovative tools to turn over the coffee (“Rodotigre” and “Vaquinha”), mounted to a motorcycle (biciamontoador) with pads in the back to revolve the coffee in the yard and others. Besides the microinnovations in the tools,Thiago extended these innovations to increase the production of certified and inspected coffee seeds, adding value to his product. They began to produce special coffees, in micro-lots, for special clients who looked for sustainable farms.
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Thiago followed the steps of his father in keeping tall native trees in the middle of the coffee plantation, giving a characteristic aspect to the farm. He very carefully managed the natural resources of the farm: the water, the soil, the biodiversity, the forest reserves, the springs, and lakes. These actions put him under the spotlight, and he was identified as a new age entrepreneur participating in contests promoted by an agency for the development of micro- and medium-sized companies. He received prizes, articles in magazines, and recognition for his deeds. Teachings of the Case: • The production of seeds to add value to the coffee in the field instead of common coffee, and the production and commercialization of roasted and ground coffee with self-brand in the Federal Capital-Brasília for HORECA (Hotels, Restaurants, and Catering) shows innovations induced by prices in a struggle to survive, despite the size of the farm. • Introducing sustainable production methods, which resulted in awards in environment management from support agencies, gave visibility to the farm, attracting clients who valued special coffees produced on a sustainable basis. These routine actions and the pursuit of different tools created conditions to develop new approaches as resource-based innovations. • Encouragement of creativity, an open dialogue, and good relationship with collaborators generates positive externalities for the business. Knowing the farm thoroughly was essential to discover the real needs of the operations, leading to the development of simple and efficient tools made locally. Again, this is an example of resource-based innovation, in this case, developed on the farm. Small innovations and changes in the routines have effects on the total results of the farm. Motivation: Value-adding strategy, improvement of commercialization, and improvement of specific technical operations. Technical Aspects: Environmental impact control. Managerial Aspects: Production costs control, improvement in the general management of the farm, value addition to the product, contracts, and commercialization.
7.4.6 Case 6: Denomination of origin Cerrado—DO Cerrado Mineiro This an atypical case with a focus on the collective and coordinated actions made by groups of leaders (farmers) of Cerrado Mineiro, aiming to add value for their members through differentiation of their products. There
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was a need for institutional support, such as law or rules of the game. At the beginning of the movement of regional protection of the brand Café do Cerrado, this group benefitted by the passing of a bill in the Brazilian Congress that regulated rights and dues relative to industrial property. Inside this bill was included a part that governs the Denomination of Origin. This group of producers is subdivided regionally in other counties into groups called “associations.” They started an effort to organize themselves in these associations, giving technical support and helping with marketing, merchandising actions, and representation of the farmers. There was some criticism by groups of traditional farmers, but they were quickly surpassed by the majority of people who had a new mentality and were opening a new agricultural frontier with no links to the past. From the first movements of winning awards for quality, the producer’s associations and cooperatives became more and more aware that, without a union, there would be no future for the coffee produced in the Cerrado region. The idea of having a brand, Café do Cerrado, had always been the target of some farmers. Starting the organization to obtain the indication of origin, they conquered this step in 1996. Advancing to the denomination of origin, a much more complicated set of rules, with rights and dues and the possibility of exclusion, they finally got the certificate published officially in December 2013. The result of this process was the conquest of the denomination of origin (DO) after 23 years of work, dedication, collective actions, and focus. The DO encompasses: • 55 cities. • A production area of 200 thousand hectares, of which 88.240 ha are within DO. • 939 farms and 833 farmers within DO. • 5 million bags of coffee are the total production of the region. • 12.5% of the national production and 25% of the production of the state Minas Gerais. Teachings of the Case: • The case shows that the collective search for results that add value to a group of producers by their product is worthwhile, despite all effort and energy spent in this search.To obtain these results, the producers needed to change their routines in production: the management of several key points in the farm like pesticides contamination, conservation of soil, water management, accountancy, costs control, care with hiring workers,
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concern with the quality of the coffee produced, and many more items that were innovatively introduced in their normal work. • Actions for the common well-being need strong leadership, able and dedicated people to carry on with projects like this. There is also a need for discipline of its participants to comply with the rules and obligations of the denomination of origin. • The innovation is the capability of working together toward a common goal and achieving it. Motivation:Value-adding strategy and improvement of commercialization. Technical Aspects: Environmental impact reduction, technical diffusion via rural extension. Managerial Aspects: Reduction in production costs, improvement in the general management of the farm, value addition to the product, improvement in contracts and commercialization, improvement in social relations with stakeholders.
7.4.7 Case 7: Conquista Farm, Venda Nova do ImigranteEspirito Santo The name of the small farm could not have been more significant: Conquest. This name is due to what these small farmers conquered with their work and sweat. The property rights of this farm; they bought it. They were not privileged by any government social program of access to land so prevalent in Brazil. This fact, by definition, is already innovative in Brazil in familiar production. The main features of this case are the power of the will to have access to land by market acquisition instead of agrarian reform. This family very clearly has the concept of property rights. This fact may have been a consequence of their work as sharecroppers in coffee plantations. There is also an example of resource-based innovation with the process of rationalization in the use of water for the preparation of the coffee. These small farmers knew they had to pulp their coffee to obtain quality and then get a better price for their product. The system SLAR (system of residuary water cleaning) was a result of a joint effort between research institutes and university (INCAPER, IFES, EPAMIG, UFV, and Embrapa Café) and, in this case, the work of this family to construct, install, and run the project. It consists of the reutilization of water in a closed system without compromising the quality of the coffee.There is a reduction in the volume of water (it can reach 90%) in the coffee processing significant to every farmer, especially to those who are in regions with a scarcity of water. This microinnovation is strategic in the global warming period and can easily be replicated and widespread.
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One characteristic of this project is its low cost and the fact that farmers can build their facilities. After processing the coffee, the disposable water is ready for use in fertilization-irrigation, meaning a further reduction of costs with fertilization and the rational use of natural-saving fertilizers. Teachings of the Case: • This case shows the importance of the role of the rural extension of research institutions for small farmers as a means to produce resource-based microinnovations with good results in costs. • It shows the contribution of science in a rational way of using water, avoiding pollution and saving fertilizers. • Low-cost and do-it-yourself projects can be easily replicable and diffused innovatively with the help of the rural extension and the university. Motivations: Cost-saving, value-adding strategy, and improvement of specific technical operations. Technical Aspects: Environmental impact control, local technical diffusion, technical diffusion by rural extension. Managerial Aspects: Production costs effects, improvement in the general management of the farm, value addition to the product, contracts, and commercialization.
7.4.8 Case 8: Educampo (Field Education) Matas de Minas—SEBRAE (Agency for support of small and medium companies and Specialty Coffee Assoc. MG) The region of the Atlantic rainforest in Minas Gerais has astounding landscapes of mountains and woods. But within this beauty hides problems that have caused problems for coffee production for more than a hundred years. With new technologies and innovation, namely the pulping process, producers finally surpassed the hidden problems of the region: an excess of humidity and clouds, leading to an impossibility of obtaining good quality coffee with natural sun-drying. With the new system, obtained with the use of pulping machines, the coffee region received an upgrade in quality but also an improvement in costs.The new processes implicated new costs, which were a problem for the coffee producers. A group of producers got together, united by friendship connections, and created an association of special coffees, The SCAMG, in 2001 in Manhuaçu, a county in the region.This group was looking for solutions for the low prices of the coffee paid by the market that year and also searching for solutions for improvement in costs caused by investments to produce quality coffee. The key was to sell better or reduce the cost.
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Exchanging experiences between them, they saw that they could reduce costs. But they needed a common base for comparisons. This was the seed that led them to unite efforts with a public agency in support of small and medium enterprises: project Educampo (Field education) Matas de Minas. This is an innovative collective action aimed at cost reduction, increasing their competitiveness, improvement of yields, quality, and ways of commercialization. This system provided information so they could make comparisons, among them verifying if their farm was above or below the group average. In this way, the farmer could make better decisions in the management to improve his performance. The key to the innovation was the widespread diffusion of all the knowledge accumulated and created in this collective among them, with the help of the technicians of the agency. The main features of the project are the participation of 11 farmers with 24 farms, an area of 1200 ha of coffee. The technical personnel of the agency produces monthly reports containing production costs and ranking of the farmers to compare themselves and their practices to achieve their results. There is a sharing of knowledge and an immediate diffusion of methods to one another. The great achievement of the project was the reduction of total costs per bag by 16% in the last biennium 2015/2016 and an increase of productivity in 22%. Teachings of the Case: • The collective action and the diffusion of knowledge are innovative, as well as the resource-based competences shared with one another. • The lack of property rights in knowledge creation is particularly relevant because the Educampo Project exists in other regions of the State of Minas Gerais, and each one of the projects uses their knowledge without concern in hiding or covering information. The producers discovered that there was strength in sharing and exchanging information on costs and practices instead of competing and hiding information from one another. Motivations: Cost-saving, value-adding strategy, and improvement of commercialization. Technical Aspects: Local technical diffusion, technical diffusion by rural extension. Managerial Aspects: Production costs effects, improvement in the general management of the farm, value addition to the product.
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7.4.9 Case 9: Retiro Farm, Manhuaçu, Atlantic Forest Minas Gerais Mr. Lage, the owner of Retiro Farm, learned the arts of developing and adapting equipment for the coffee farm in an innovative way with his father in law, in a resource-based competence, and also learned to share these improvements with anyone who came to his farm looking for the information. At the time, the machines played an essential role in the development and growth of the quality of the coffee produced on the farm. One of the great adaptations of tools was a coffee processor that could deal with different stages of maturation of coffee and process all of them. This family of farmers has routinely developed, adapted, or improved equipment that can make an even better preparation of the coffee in the postharvest. Innovating all of the time is the mote. The creativity of this family seems to pass from generation to generation contributing microinnovations to the coffee community. Their major contributions are: The pulper for dry coffee.This homemade solution is not present in the markets to sell. However, it can be replicated in the garage of any farm that has an able person to do it. The pulper to process naturally dried coffees or pulped cherries (CD) is machine developed on the farm and works for both products with excellent results. The bag lifter is an interesting device, also developed there, that permits the worker to lift the bag alone up to his head to make the coffee piles in the warehouses. Simple solutions made by wise people can solve many problems. Teachings of the Case: • When the farmers are looking very close at the functioning of the machines or just one operation on the farm, he can find a solution to a problem. • The management of business needs dedication to the activity and monitoring all the time. • To understand a problem increases the chances of finding a solution. • Formal education is not always a passport to creativity. Will and motivation act as master springs in many processes. Motivations:Value-adding strategy and improvement of specific technical operations. Technical Aspects: Local technical diffusion. Managerial Aspects:Value addition to the product.
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7.4.10 Resume of the categories of the cases According to the main motivations to develop innovation, the cases were grouped as: cost-saving, value-adding strategies, improvement of commercialization, and improvement of specific technical operations, as shown in Table 7.1. In the category about the technical aspects, the application of innovation in the reduction of environmental impacts (6 out of 9) was evident. The two other aspects observed were the ease with which the innovation could be diffused either through the neighbors (5 out of 9) or through the rural extension system (6 out of 9). Table 7.1 Main motivations of innovations. Cases
Cost saving
Value adding strategy
Commercialization
Technical operations
1. Da Serra Farm 2. Passeio e Lagoa Farms 3. Caxambu Farm 4. São Paulo Farm 5. Jatoba Farm 6. DO Cerrado 7. Conquista Farm 8. Educampo 9. Retiro Farm
Table 7.2 Technical aspects of the cases. Cases
1. Da Serra Farm 2. Passeio e Lagoa Farms 3. Caxambu Farm 4. São Paulo Farm 5. Jatoba Farm 6. DO Cerrado 7. Conquista Farm 8. Educampo 9. Retiro Farm
Environmental impact control
Local technical diffusion
Technical diffusion by rural extension
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Table 7.3 Managerial aspects of the cases. Cases
Value addition to Contracts and Production costs Improvement in the product commercialization effects general management of the farm
Relations with stakeholders
1. Da Serra Farm 2. Passeio e Lagoa Farms 3. Caxambu Farm 4. São Paulo Farm 5. Jatoba Farm 6. DO Cerrado 7. Conquista Farm 8. Educampo 9. Retiro Farm
The category improvement in general management of the farm emerged with strength along with Addition of Value to the Product for both subcategories (7 out of 9 cases), as well as the reduction in production costs and the improvement in contracts and commercialization for both subcategories (6 out of 9 cases), and, finally, improvement in social relations with stakeholders (4 out of 9 cases).The resume of this categorization can be seen in Tables 7.2 and 7.3.
7.5 Conclusions Innovations are central to the survival of modern agribusiness systems. The focus of this research was the less studied innovation process: the microinnovation in the farm. We found evidence to confirm that farmers have room to innovate at the farm level. The modalities of innovation identified in the cases were improvements in equipment; innovation in production, postharvest, and in marketing activities; and management of production and costs, as well collective actions. To answer the question about motivation, impacts, consequences of the innovations, and microinnovations identified in the nine cases, they were separated into categories and subcategories. The cases showed successful farmers with their microinnovations whose initial motivations were (in this order): value-adding strategies, cost-saving, improvement of commercialization, and improvement of specific technical operations.
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The positive consequences were: reduction of environmental effects, technical diffusion via neighbors, technical diffusion by rural extension, addition of value to the product, reduction in production costs, and the improvement in contracts and commercialization. In line with the theoretical support, in most of the cases, the innovation emerged from routines developed by farmers during their daily activities, such as forms of tacit knowledge that cannot be packed and traded. This occurs due to specific competencies of innovator, as was shown in the cases of Da Serra Farm, Passeio e Lagoa Farms, Caxambu farm, São Paulo Farm, Jatoba Farm, and Retiro Farm. The innovation can also be the result of a partnership with research institutions, as in the cases of Caxambu Farm and Conquista Farm, or as a result of collective actions as shown in the cases of Denomination of Origin of Cerrado and Educampo. The sum of the knowledge gained over time, sometimes concentrated in the agricultural producer and sometimes present in the routines developed within the farm, represents a generator of useful and value-generating knowledge. Innovation has cumulative effects; it affects the routines of production at the farm level, and it can affect other agents of the agribusiness system. It is a continuous process, and it cannot be ignored.
7.5.1 Recommendations for researchers The real problems faced by producers on a day-to-day basis represent incentives for innovative actions. A partnership among educational institutions, researchers, and extensions in a collaborative way with farmers can generate relevant results, mainly for small rural properties. There is a lack of studies that focus on the effects of microinnovations that happen from everyday experience, inventiveness, and an ability to solve problems.
7.5.2 Recommendations for farmers and companies Rural producers working in the same region may find different solutions to the problems they face. The skills that each producer brings in their baggage allow them to discover different ways of dealing with similar problems. Dedication to work and personal talent are differential in many cases. Not everyone has skills in mechanics, for example, however, many solutions can be found on the farm.
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Farmers, when not competing with neighbors, only tend to gain from sharing information about practices and costs. Good relationships with employees and encouraging creativity can generate positive externalities for your business, sometimes at a very low cost. The search for value aggregation in agribusiness is not trivial. It should be studied and rigorously planned.The bigger solution is not always the best in efficiency. Efficiency gains come from a sustainable organization on the economic, social, and environmental tripod.
References Binswanger, H., 1974. The measurement of technical change biases with many factors of production. Am. Econ. Rev. 64 (6), 964–976. Farina, E., 1997. Coord. Estudos de Caso em Agribusiness. PENSA, Pioneira, São Paulo. Griliches, Zvi., 1960. Hybrid corn and the economics of innovations. Science (New Series) 132 (3422), 275–280. Paiva, R.M., 1971. Modernização e Dualismo Tecnológico na Agricultura. Pesquisa e Planejamento Econômico.V1, dezembro. Schultz, T.W., 1961. Investment in human capital. Am. Econ. Rev. 51 (1), 1–17. Zylbersztajn, D., Giordano, S.R., Almeida, L.F., 2011. Projeto Estudos de Casos BNDES. PENSA.
Further reading Zylbersztajn, D., 1996. Governance structures and agribusiness coordination: a transaction cost economics based approach. Res. Domest. Int. Agribus. Manag. Res. Annu. 12, 245–310. Zylbersztajn, D., Neves, M.F., Caleman, S., Org. 2015. Gestão de Sistemas de Agronegócios. Atlas, São Paulo.