Sustainable development, Innovation/Business development

Dr. Thea van Kemenade

februari 2010

'Strenge milieunormen bij APK-keuring' Uitgegeven:2 februari 2010

Minder pesticiden in China, jan 2010

Biobased Economy

DSM invests in development of bio-based materials in ChinaMarch 2009

Menu today1. General topics innovation / valorisation/ business development2. Format business proposition: BOP3. Values and identity: assignment 14. Trends in society and business5. Trends in Business Market landscape 21st century

– personal identity

– Group assignment: elevator pitch: why is my business going to be a success

6. Choosing the scope7. Industrial market development: success or failure8. Examples: materials, processes, services

– Example 1: nanosensors– Example 2: fibre reinforced composites– Example 3: Market development India– Example 4: Biobased block polymers by fermentation– Example 5: Plato– Example 6: Personal Example Fluffy Flax– Example 7: Sustainable agriculture and GMO’s :role of stakeholders / consumer

9. Assignment 2: business conditions: stakeholders description10. Assignment 3: competition

– Bulk or new business?

11. Assignment 4: Make your own business case

General Topics: Valorisation Innovation and business development

• Knowledge based value generation – Societal (public benefits)– Economic (companies, industry, consumer products)

• Knowledge paradox– NL strong position in science and knowledge based economy– “weak” position knowledge transfer to society or industry or

value / business development from knowledge workers– OESO- innovatie-index: NL gezakt naar plaats 12 (Volkskrant 19 feb)

– Push or Pull? • University task or GTI’s (oa TNO)?

– Entrepreneurship in NL of EU?• Cultural aspects: shame of bankruptcy or learning curve?

General Topics:Knowledge Push or Product Pull?

Knowledge Development

Product development

New

Kn

ow

led

ge

Cu

riosit

y d

rivenN

ew

pro

du

cts

Product orientation: Pull

Knowledge orientation: Push

Desire

d S

pecifi

catio

ns

Ind

ustria

l Partn

ers

Product Push or Market Pull?

Product Development

Market development

New

pro

du

ctsNew

mark

ets

Market orientation: Pull

Product orientation: Push

Acq

uis

ition

Sale

s

Knowledge intensive businesses: How to bridge the Gap?

market product knowledge

Business case - business propositionBOP: bedrijfsontwikkelingsplan

• Start with identity and mission statement (values !!)• Formulate your proposition – unique selling point:

Focus, Scope (Niche: op welk onderscheidend veld)

1. For Who: what need / demand/ specific problem

2. What: what can I do / deliver / offer

3. How: what is the discriminating way of doing it?

4. Proof of concept: what piece of evidence, experience, competences to proof my abilities

5. Licence to produce / operate

Values and Identity

• What values?– Always important (leading role)– Mostly important (role? Front positon?)– Often important (role? Position?)– Less important (role? Medium, following?)

• Identity profile (how to translate values in business concept / proposition/ unique selling point (USP)

Presentations (assignment 1)

Trends in Society and business

• Globalization• Concentration, economy of scale: Mergers• Mass individualization• Consumer demand leads to Chain reversion

– E- commerce, B2C instead of B2B(more complicated networks)

– Sustainability, health– safety, product/process quality– Triple P: people, planet, profit….. Wish or Want?

• Willingness to pay??• Less than 5 % higher price for sustainable product, however…

food? Sustainable meat?

Consumer Power: shareholders vs stakeholders

• Brent Spar: 1991 ceased operations• 1991 – 1993: research disposal options and environmental impact

assessment• 1995; Sinking of Oil storage in Brent Oilfield, approval by UK government• 26 January 1996: a majority of the British public were aware of the Brent

Spar (57%). Of these, 57% were opposed to the dumping of Brent Spar in the Atlantic, and 32% were in favour of it.

• Although Shell had carried out an environmental impact assessment in full accordance with existing legislation, they had severely underestimated strength of public opinion. The final cost of the Brent Spar operation to Shell was between £60M and £100M, when loss of sales were considered.

• 29 January 1998: Shell announces Brent Spar will be disposed of on shore and used as foundations for a new ferry terminal.

Trends in business• Fast availability/ turnover of new technology• Upcoming Markets are seen combining traditional separated market

segments– Food – Pharma– Materials – Medicine – Life Sciences ICT – Neurosciences– Production Chains: Agribusiness & chemical Industry– Multimedia, business communication and ICT– Process innovation – product innovation – Transport & Logistics

• Mergers of companies• New industrial revolution?

– Consumer Power: socio-economic development (stakeholders value vs shareholders value)

– Financial crisis: governmental role in shareholders of banks, shares in public domain, sustainability, long term optimisation vs short term interest (bonusses)

– Risk capital? Investment capital?

Organizational Ecocycle

Trends in Business Market landscape 21st century

Emergent Action Constrained Action

5

Charismat

ic

leadership

1

Stra

tegi

c

man

agem

e

nt

Hurst 1995

6Creative network

7Choice

8Entrepreneurial action

2Conservation

3Crisis

4Confusion

Rational Action

Personal identity in correspondance with lifecycle business

Personal identity: maximum 2 positions

Emergent Action Constrained Action

5

Charismat

ic

leadership

1

Stra

tegi

c

man

agem

e

nt

Hurst 1995

6Creative network

7Choice

8Entrepreneurial action

2Conservation

3Crisis

4Confusion

Rational Action

Group assignment

• Where is your personal position?– Fits life cycle of market position of your own

business / competion?

• Reflect on your business case and personal position– What stage is fine, what stage will become

difficult?

• Bring your message across: elevator pitch– Why is my business going to be a success

Choosing the scope

• Nokia: focus on top-sport, athletes, later on, renewal as consumer sports

• Chemco: grafical arts photographic films (niche, instead of consumer films: Kodak, Fuji, Agfa)

• You Tube: dating service…. 1.5 billion € within one year

• Spijker – Saab??

Industrial Market developmentSuccess or failure?

• Which elements are conditional?1. (non-)Existing technology, combinatorial renewal, innovation2. (non-) Existing production process, infrastructure3. (non-) Existing networks4. (non-) Existing market demand and commitment

• No more than 1-2 conditions non-existent• Timing: not too early, not too late• Depending on variety of change, it takes 3 – 20 years of

development till market implementation / success

• Sustainable business, often > 2 non-existent: takes time!!• Perceived conflict between economics and

sustainability/responsible governance, within original business: need for new alliances

• Breakthrough innovation / transformation: “high risk investment”: Situation 2010?

Examples

• Sustainable business development– Materials, processes, services

Areas of sustainable development:(Biobased) materials

• Polymers– Functional polymers/ biomaterials– Colloids: non toxic biodegradable paints / cosmetics / Coatings– Automotives: system – integration, safety, sustainability, fibre

reinforced composites (recycling), integrated information carriers (safety)

• (Bio-)Chemistry – Life Sciences– Encapsulation: slow release of (enzymatic) catalysts, drugs, washing

powder (example OMO/Proctor & Gamble: market fight)

• Information carriers– Chips/ PC / mobile phone / e-learning / e-business– Sensors / tracing & tracking / labeling / feed back regulation

• Energy– Solar cells, LED’s

Areas of development: processes

• Production processes:– Enzymatic production,

fermentation: reduction in processing steps

– lab-on-a-chip: miniaturisation: effect on investment / depreciation cycles

– Plant cell production (medicine production in genetically modified plant cells)

Areas of development: services

• Transport and Logistics– Reducing/ optimizing transport (container,

packaging / freight logistics)– Reducing stock: “just in time delivery”– Reducing waste (losses in handling,

packaging)

Sensor TechnologyReducing fresh product

waste

• Market: Export market of Fresh produce • (Netherlands is market leader in flowers, greeneries)• Airfreight - Shipping, NL to USA• Claims / pricing• Sensor technology:

1. Nanosensor measuring respiration, photosynthesis of plantcells and nanotransport by protein activity in cell walls (determining cellstress)

– Feed back regulation loop: controlling cell stress factors and stopping respiration, prolonging lifetime of fresh produce

2. “Conventional” Shock/ vibration sensor during transport by truck, ship, aircraft

Sensor Technology

Valorisation Conditions• Existing product and market, • Expanding technology (sensors - nanosensors)• Existing network in fresh produce, greenery and

transport sector• Cost saving, price and quality improvement, claims

and risks minimized• Fast market implementation ( 2-3 yrs)

High-performance polymers

Engineering plastics

Commodities

PI PAI

PSU LCP

PEEK

LDPE

HDPE

PP PS

PVC

PA 6 ABS

SMASANPOM

PBTPC

PA 4,6

PA 6,6

PET

Fibre Reinforced Composites: Polymer Commodities with quality of Engineering plastics

Fibre Reinforced Composites: Automotives

Kevlar (polyaramide)

Contract Research for Mercedes / ECIA • Replacing glass/kevlar reinforced composites• Innovation = biofibre reinforced composites or hybrids• Enhancing PP properties to engineering plastics

– Price/performance ratio : equal price – Weight advantage / energy use / safety– Recycling properties

Valorisation conditions• New raw material (biobased or hybrids)• New processing technology• New networks: automotives – agriculture• Existing product• Existing market demand, end-users and sales organisation

Stress factors• Unknown raw material

– Technical factors and worries– Homogeneous Quality of biofibres

• Agricultural stock: dependence of weather?• Dependence of season?• Continuous production and delivery?

• New Production process: – Separation of pure cellulose strands and molecules– Non-woven production/ woven fibres/

fibre spinning

• Cultural shock between automotiveand agriculture (Mercedes – vdBilt)– Will you deliver? Production guarantee– Will you buy? 5 yrs commitment for tonnes/annum– Insufficient trust in partner and raw material quality– Dress Code?????

Market development India

• Low cost production in Asia

• Bulk quantities of Coir fibre (burning, CO2)

• Fibre reinforced composites (planet, profit)– Automotives– Furniture– Packaging: Fruit crate for export market,

reducing quality loss during transport

• Role of unions: “people” quality of life

Biobased fermentative production of polymers

• Example: Caprolactam major fibre intermediate of DSM in the production of nylon-6

• Production via chemical synthesis– Large investment in production process

• Research on fermentation of Maïs waste to produce caprolactam– Timing: depreciation cycle

Biobased fermentative Production of large volume block polymers

Valorisation conditions• New raw material (biobased)• New processing technology

– (de-)Investment cycle• New networks:

– Chemical industry – agriculture• Existing product• Existing market demand, end-

users and sales organisation• DSM: wanting her first success

example of DSM - Gist

Biobased fermentative production of polymers

• Production feasible, reducing reaction steps• Prices feasible on the basis of mais waste

However:• Turnover needs large volumes year round

– Waste position covers worldwide not enough volume, guaranties for volume and quality?

• Logistic problems, transportation, production campaigns, stock problems

• Dedicated production: where, Prices triple?• Ethical Dilemma: crops for food / non food

– Worldwide supply of food?

No Go!

Plato

• Soft wood Hard wood • Steam process: autoclafe Akzo Nobel• Existing proces for new product• Existing network• Existing market

• However: too much demand in short time• Production capacity failed, could not deliver

Personal Example

• New Ventures Competition 1998– First round: business idea (1700)– Second round: business plan (700)– Third round: market development

(10)• “Fluffy flax” first price

– Cellulose micro fibril out of flax for non woven products

– Process of steam explosion and extrusion to open up microfibrils and molecule structure / assembly

• (absorption capacity)

Fluffy Flax

Cellulose Fibres for nonwoven production• Products:

– Disposable bed – “linen” (medical use)– “linen” table cloth (Duni)– Industrial and medical wipes (chemical /medical waste)– Heatsealable infusion paper– Napkins (absorption)

• Replacing synthetic polymers: Polyester, viscose• Two (worldwide) patents:

– process patented, opening up fibre molecules– application patent

• New raw material, same drylaid/wetlaid non woven process

Fluffy Flax

• Market:– World wide market (substitution up to 2 %)– 10 main customers (Producers of nonwovens, 200

small ones in total)• DuPont, Kimberley-Clark, Hoechst, Akzo Nobel, Lantor,

Dexter, BBA, Freudenberg, PGI, SCA - Duni • 5 with interest and production trials:

– 3 contracted customers for phase 2, startup capacity – 3 contracted customers for 70 % production volume for phase 3

• Limited marketing costs, clear distribution channels• Possible production satellites in Canada, Ukraine, China

in phase 3

Fluffy Flax

• Price and Economics– Cost FF: 0.75 $ raw material + 0.5 $ process costs:

• total cost 1.25 $– Price FF: 1.50 - 1.75 $– Polyester fibre: 2 $– Viscose: 1.8 $

• Customers 5 – 10% cost savings, same quality but biodegradable and renewable (CO2)

• Profit: best / base / worst case: 53 / 38 / 3% - more than 25 %– Annual pretax profit: 6.5 mln €

• Investment: – Phase 1: preliminary production runs (100 tonnes)– Phase 2 existing cultivation (3000 tonnes/yr – investment 1.8 mln €)– Phase 3: dedicated cultivation (13.000 tonnes/yr – investment 7.5 mln €)– Capital requirement in total till break even: 20 mln €

• Investment partners available (Gilde, ABN Amro)

Fluffy Flax

• Partners and Business Team – Spin off: ANV AgriNewVentures (patent, expertise, technology)– Belgalin (flax sourcing & blending)– Agro-Industria Complex Dinteloord (production site, infrastructure)– Venture Capital (Gilde)

• Senior Non Wovens Industry• Senior Marketing

• However: price PET drops to 50 % in 1999!• No Go for phase 2

Sustainable agriculture and GMO’srole of stakeholders / consumer power

• Goals:– Plant disease resistance in food production by genetic

resistance • Potato fungal disease: Phytophthora infestans • Biological Pesticides

– Production of functional proteins / polymers (PHA production, medicine/ drug delivery)

• Bull “Herman”: piece of humane genome to produce lactoferrine in milk

• Tomato secondary species: cancer medicine

• Stress factors: GMO free agriculture and food?– Contamination:

• Survival of the fittest: introduction of “new” species• Liability

– Use of Food source for Non – Food purposes?• 2nd generation of bio fuels, bio-energy, materials

Assignment stakeholders and conditions: How is this situation for your own business?

• Presentation 2: stakeholder analyses

• Integrate 1 slide: 1, 2, 3, 4 existing/ non-existing conditions

Competition: Bulk or new business

• Existing bulk industries– New business is by-product– Slow, inflexible, disinvestment timing– Risk avoiding but enough investment

capital– Scale up facilities– Stakeholders or shareholders value

Competition: Bulk or new business

• Start-up companies– No experience in business,

market development– Team! (hinders growth: early

consolidation)– Production capacity, liquidity

problems, scale up problems: absorption capacity

• Spin-off companies• EXIT strategy?

Start-ups in The Netherlands

• Low amount of knowledge based starters• Low “innovation turnover” in Europe (OESO)• Every 10 starters

– 5 stop within the year– 3 survive– 2 successful

• Lessons– Avoid scientists– Avoid Industrial production– Organise your Scale up in advance!!!

• Team!!– All competences on board– Entrepreneur in your team or entrepreneurial partners– Not a scientist on top position

Uni

How to “sell” innovation?

Business case - business proposition

• Start with identity and mission statement• Formulate your proposition – unique selling

point

1. For Who: what need / demand/ specific problem2. What: what can I do / deliver / offer3. How: what is the discriminating way of doing it?4. Proof of concept: what piece of evidence,

experience, competences to proof my abilities• How to organise scale up / consolidation

5. Licence to produce / operate

Team Assignment

• Pick your subject for the business case• Team: present why this team..

– What is needed / missing in your team

• Presentation:– business proposal: business idea and sustainability impact – Identity, mission– Fill in 1 – 5

1. For who, what demand, Scope!2. What: USP3. How: USP4. Proof of market concept: why me? Competition? 5. License to produce (: values, p,p,p – sustainable impact in the

production/market chain, ethics, stakeholders)