Source: McKinsey Digital
Launching a successful new business concept requires a strong purpose, a focus on research, an innovative business model, and a willingness to adapt to the market.
Starting a new business is tough for any start-up, but building a company on an entirely new business concept presents a whole other level of challenges. In a conversation with McKinsey’s Jerome Königsfeld, Infarm CEO and cofounder Erez Galonska shares his passion and vision to change the way people eat and reflects on his learnings from bringing the Infarm food-production concept to 50 percent of the world’s largest food retailers.
Key insight #1: Setting up for success. Organizations require a strong purpose to manage the hardships of business building.
Jerome Königsfeld: Today, Infarm is an international business with more than 900 employees operating across ten countries. Take us back to 2013, when you started the business together with Osnat Michaeli and your brother Guy Galonska. What was the motivation behind launching Infarm?
Erez Galonska: I have always been fascinated by self-sufficiency because, for me, it ultimately means freedom. So in late 2004, I started to explore what it really means to be self-sufficient. I looked at everything from how to become energy and water self-sufficient to growing my own food.
In 2005, I started traveling between different communities and was doing work in exchange for lodging. I did many types of manual work on farms, ranging from picking mangoes to growing vegetables. At the peak of this journey, I lived on a mountain in the Canary Islands and was living completely self-sufficiently.
During this time, I became obsessed with growing my own food and saw that it allowed me to try more interesting varieties that don’t make it through today’s industrialized supply chains. When I moved back to Berlin, I asked myself, “Why can’t I take my farming with me? Would it be possible to grow my own food without soil?” When I did my research on this topic, I encountered two things: 1) there was a group of people who already farmed without soil as part of a movement called hydroponics, and 2) I saw these utopian pictures of plant-covered skyscrapers in cities, which gave me confidence that I could change the way we source and eat food. This became the driving force to build Infarm.
Early on, my brother and I built our first hydroponic farm in my parents’ living room, growing large green basil. When this proved successful, we asked ourselves how we could turn this into a business.
Jerome Königsfeld: How did you set up your first commercial farm?
Erez Galonska: We spent a year researching; you have to imagine hydroponics as an umbrella for lots of different techniques that we had to learn about. The outcome of this was that, in late 2016, together with a set of designers, mechanical engineers, and craftsmen, we built our first commercial farm in Berlin in Neukölln.
This first commercial farm also helped us to attract exceptional talent who were inspired by our purpose. At our food lab, future employees could experience for themselves the potential of Infarm to change the way people eat: having access to fresh fruits and vegetables grown near the point of purchase without pesticides and customized to local diets. This shared purpose helped us through some early hardships, when we had little funding and could barely pay our first employees. Our purpose kept us motivated to keep going.
Jerome Königsfeld: How did you make your first customers aware of Infarm?
Erez Galonska: We installed farms in caravans and put them into Berlin’s Prinzessinnengarten, which is an urban gardening project. We held workshops educating people about urban farming, which created awareness and a community of followers around the Infarm concept.
Our first customer was somewhat unexpected: 25hours Hotel, an international hotel chain in Berlin. An architect visited our urban farm and was immediately excited to bring it to 25hours Hotel, an opportunity that we hadn’t thought of before. We visited the site, and then started doing research into how we could best bring our concept to the hotel chain. There had been success in growing plants on skyscraper rooftops, which gave us confidence that we could do the same with food production. We built a farm on the hotel’s rooftop and called it the Sky Farm. Word quickly spread, which helped us reach more customers.
Key insight #2: From pivoting to scale. Once you’ve found product-market fit, rigorously double down on the opportunity and scale.
Jerome Königsfeld: When did you know that it was the right time to scale the business?
Erez Galonska: The CEO of one of the biggest wholesalers in Europe came to our Berlin food lab to experience the future of food. We had worked together with a designer to render one of our farms inside a retail store for a demo. When the CEO saw this, he presented us with a challenge: he would close a deal on the spot if we were able to bring the Infarm concept into his retail locations.
We accepted the challenge and built our first farm in a supermarket. After three months, we launched the world’s first cloud-connected farm, where we use smart devices to gather data from the farm and apply analytics technologies to improve growing conditions, essentially creating a self-learning farm. This enables us to perfect our growing recipes and improve the yield, quality, and nutritional value of the food grown. When a video of the “farm in the supermarket” was uploaded to YouTube, it went viral. The farm attracted more than seven million views, and we received requests, mostly from retailers around the world, to build connected farms in their stores.
Jerome Königsfeld: This was when you realized that you had achieved product-market fit?
Erez Galonska: Yes. Up until that point, we had been experimenting a lot. We had been working with many different types of clients like restaurants and hotels to determine who would benefit most from our technology and where we could create the biggest impact.
The pilot at the wholesaler supermarket proved that the concept of connected farms at supermarkets was a winning formula, which enabled us to rapidly scale. We rigorously doubled down on retailers, standardized our retailer approach, and can now set up operations in a new country within three months. Today our farms can be found in 50 percent of the world’s largest food retailers.
Jerome Königsfeld: What is the business model?
Erez Galonska: We call it “farming as a service.” Retailers sign a multiyear contract with us defining the capacity they require, and we then install the required Infarm modules to meet demand. Our farms are designed especially for urban spaces, ranging from formats that can fit in a typical fruit and vegetable aisle to those developed for our large-scale, high-capacity Growing Centers, containing individual farming units each capable of producing the equivalent of 10,000 square meters of produce. This allows us to easily scale production for retailers of any size, whether they are serving a neighborhood or a national retail network.
The Infarm modules remain our property. We receive income per harvested plant. Our employees take care of the farm, including installation, cultivation, harvesting, and maintenance. All farms are controlled remotely; Infarm employees visit farms as needed to plant new seeds.
Key insight #3: Never lose sight of your north star. To unlock future growth, an organization must be willing to change and adapt.
Jerome Königsfeld: How did you ensure that your organization could cope with fast-paced growth?
Erez Galonska: We combine strategic and operational aspects. First, you need to make sure that you define your north star and never lose sight of it. Our north star has always been to serve the world with fresh premium products across the full spectrum of vegetables. We reverse engineer to define what we need to work on today to achieve our mission.
To unlock scale, you need an offering that is replicable. One example of this is that we have a “playbook” for entering a new city that enables us to rapidly enter new markets and set up operations. The playbook contains everything from job descriptions, to the ratio of people to farms, to how you connect and plug in the farm.
In the first year, we installed our vertical farms in ten cities. Today, we set up in ten new cities in a quarter. And because we use the same playbook for every city, our approach improves over time as we apply our experiences and feedback to it. Additionally, we focus on product modularity. This means that, depending on customer needs, we can quickly assemble the right mix of hardware modules and then customize environmental conditions via the cloud. In this way, we have built a system that scales, without compromising on quality.
Another aspect is employee empowerment and building a network of cells in the company, each with clear responsibilities. We actively encourage a test-and-try mentality with our employees, following agile principles. Across the entire Infarm organization, we employ a constant process of iterations and improvements. Processes and responsibilities are documented, in what we call the “Infarm Wikipedia,” which is accessible to all employees.
Jerome Königsfeld: How did your organizational setup change over time, as you scaled from three founders to more than 900 employees?
Erez Galonska: It’s constantly changing. When you’re growing so quickly, it’s vital that your systems and organization adapt. Every quarter we go through a “restructuring” process, rigorously challenging ourselves on what we need to change to unlock further growth and how we can best set up the organization for success. We define clear targets that we measure ourselves against and break down responsibilities to the individual employee level, making sure that every employee knows how they contribute to the targets and the overall company vision.
Key insight #4: Hardware becomes a commodity. Software will differentiate farming as a service in the future.
Jerome Königsfeld: What is the next frontier in your product development? Are there any specific areas that you focus on?
Erez Galonska: Going forward, we will focus on the software side of the Infarm concept. In the long term, the actual farms will become a commodity business, and in fact, we have already started to outsource the development of our hardware.
The majority of our future value will happen in the cloud. The “farmer in the cloud” is continuously fed with data, enabling it to learn and get smarter and determine what grain recipes work best and how much water, light, and nutrients to use.
These improvements will also help to make a significant environmental impact. Currently, our farming-as-a-service impact has helped to save more than ten million gallons of water and 600,000 square feet of land, while harvesting more than one million plants monthly and growing.
Jerome Königsfeld: What percentage of your staff works on product development?
Erez Galonska: We look a lot like an Internet of Things (IoT) company. About 10–15 percent of our people focus on product development, and then we have interdisciplinary teams of developers, plant scientists, engineers, and user-experience designers.
Jerome Königsfeld: How do you see the future of agriculture in general?
Erez Galonska: There is a massive transformation happening in agriculture right now. Technology and software allow farmers to use fewer resources to generate more yield. This is becoming mainstream.
Agriculture, from our perspective, is returning to its roots. I think that one of the biggest powers of technology is that we can again grow food where it is consumed.
A second big trend is the personalization of farming. Today, agriculture operates according to a push concept. Companies cultivate the crop and then try to get it to the consumers. At Infarm, we do the reverse, and this is where it becomes interesting. We leverage data to understand customer preferences and then grow the crop accordingly—we call it “personalized farming.” The future will be micro farms that cultivate crops based on households’ taste profiles, diets, and health needs.
We’re part of this movement of bringing farming closer to the consumer, all while being more resource efficient as well.