Case | HBS Case Collection | July 2013

Novozymes: Establishing the Cellulosic Ethanol Value Chain

by Willy Shih and Sen Chai

Abstract

As the world's largest producer of industrial enzymes, Novozymes had invested heavily for many years to bio-engineer enzymes that could break down cellulose into fermentable sugar. In 2010, the company had launched what it thought would become a breakthrough product for the conversion of crop residues from corn into fermentable sugars for the production of motor fuels. But the problem was that the company only controlled one piece of the value chain. To succeed in this nascent sector, should the company insert itself into an existing ecosystem? If so, how much coordination effort would be required to integrate the many pieces, including equipment and yeast suppliers? Or should Novozymes build its own ecosystem? And if so, how much control should it retain at each level of the value chain?

The case seeks to expose students to the challenges of putting together value chain participation strategies in a setting where they can also learn about industrial biotechnology, including some cutting edge methods in directed evolution.

Keywords: system complexity; industrial enzymes; ethanol; collulosic ethanol; fermentation; genomics; genetic engineering; value chain; assembling value chain; Energy Sources; Renewable Energy; Collaborative Innovation and Invention; Innovation and Management; Innovation Strategy; Technological Innovation; Management; Growth and Development Strategy; Industry Growth; Production; Research; Research and Development; Science; Genetics; Natural Environment; Environmental Sustainability; Science-Based Business; Business Strategy; Commercialization; Vertical Integration; Agriculture and Agribusiness Industry; Biotechnology Industry; Energy Industry; Denmark; United States;

Citation:

Shih, Willy, and Sen Chai. "Novozymes: Establishing the Cellulosic Ethanol Value Chain." Harvard Business School Case 614-001, July 2013.