Steen Riisgard, Novozymes
Release Date: 2009-09-22
Novozymes claims to think along untraditional lines. How would you describe the culture and philosophy that enable Novozymes to have this innovative touch?Innovation is what we live from. If you were to ask a business school professor how a company like Novozymes could exist, the textbook answer would be that any company needs to have direct access to its customers. At Novozymes, we do not have any interaction with our customers. We are business to business focused and never directly meet the end customers to whom we provide benefits. The only way to have pricing power is constant innovation. We develop new and innovative products that give our customers really significant new benefits. On top of that our growth is organic. We are constantly looking for new possibilities to apply our enzymes and expanding the enzyme market. Essentially what we believe is that the enzyme business has no set size and it will be as big as our creativity allows it to be.
We have grown our business at a rate of 8% over the last 15 years and over the last 4 years our growth rates have increased based our own organic growth engine, which allows us to expand our business. That illustrates how important innovation is for Novozymes. We have created a culture and a network organization where information flows between functions and regions of the world which essentially ensures that a lot of uncommon connections are created within the company and between our employees and with people on the outside. The essence of the creative spirit is to orchestrate these uncommon connections, creativity and new product ideas.
How is the innovation process organized? Does it start with basic research in the laboratories which is then applied to real world challenges, or do real world problems or global challenges form the starting point for Novozymes’ innovation process?
Our researchers units are not only located in Denmark. We have big units in North Carolina and California, decent units in Tokyo and Bangalore, and a fast growing unit in Beijing. These units work as a global team and none of these units is focused on a specific theme. Therefore, members of these five units are always collaborating on all of our big projects. This international and multicultural interaction is a really important ingredient in the creative process, and our Chief Science Officer has done a fantastic job securing this.
In China, we work with COFCO to develop second-generation biofuels based on coal. COFCO is a fast growing company and they have built several facilities in Manchuria at record speed. We promised them that we would work with them in the development of these facilities, which are the best enzymes facilities in the world. We sent our team to Manchuria to work closely with our friends at COFCO for two to three weeks. Every night, this team sent data to our facilities in Denmark where another team was working on this project. Before going to bed the Denmark based team would forward the data to California, where our unit would continue working on it until sending the data and results to our joint team at COFCO. Every morning our team in China received a range of suggestions about how to proceed based on our cooperation effort around the world. This was a 24-hour research activity that was more than successful due to the cooperation of team members around the world, which is fantastic. This is the kind of atmosphere that we are trying to create to speed up our creative process which in my opinion cannot be managed. We cannot expect our people to work on administrative tasks in the morning and be creative from 3 to 4 in the afternoon. Creativity should be driven by an innovation culture that is a way of life for the organization.
What is your personal contribution to this creative process?
My job is to orchestrate. It is to create an atmosphere and culture in the company that fosters passion and excitement to win every battle. This is not something that you do just in one day, it is a constant process. Of course, there are many other small things that I can do. I have a research background, and being a molecular biologist by training also allows me to contribute.
Novozymes and COFCO have different organization structures, cultures and creative processes. How does intersting mix influence your cooperation with this Chinese state owned company?
Of course, in addition to our creative people we also have people that are very focused on production and delivering results. We have worked hard to ensure that our employees in the production facilities are not as creative. I can talk equally passionate about this other side of Novozymes that is focussed on continuous improvement and high quality standards. This different part of the company structure should work as efficiently as the other ones. I believe that there should be room for both of these business processes in the company. What COFCO wants from us is creativity, innovation and speed. I believe it is a very fruitful collaboration that works really well.
Many companies around the world are focussed on developing next generation biofuels. What sets Novozymes apart from other companies?
The bio-ethanol process starts with generating sugars. First generation bio-ethanol can be made from a variety of organic materials including biomass and the traditional feedstocks, starch and sugar crops, such as sugar cane, corn, wheat, barley, rye, sorghum, cassava, or even rice for that matter. Of course, Brazil is a very large player in the bio-ethanol market but its sugar cane based bio-ethanol unfortunately does not require enzymes.
Most other countries, such as the US and China, are investing in large scale bio-ethanol production based on breaking starch into sugars for practical purposes. In this type of production, corn or starchy grain is ground into flour, which is then slurried with water to form a mash. Enzymes, which serve as biological catalysts in the form of proteins that catalyze chemical reactions in the cells of living organisims, are added for the conversion of starch to sugar. Our specific set of enzymes breaks long chains of sugars in the most effective way, so we provide the lion’s share of enzymes to the 180 factories in the US and the 8 Chinese factories.
The next step is second-generation bioethanol which is based on the use of agricultural waste, cellulosic biomass that contains cellulose for the same process. Long chains of glucose will be broken up just as with starch. Many people will ask themselves why is it much harder to break down a long chain of glucose if it is so easy to do it with starch. Essentially you can say that nature develops starch as a research energy source so it has to be ready to mobilize again. However, cellulose was developed as a structure component, so as such the plants are not easily degradable. We are developing enzymes that can break down cellulose. Other companies are trying to do the same but we believe that we are way ahead of the pack, and that in 2010 we will be ready to provide the world with the enzyme technology for commercially viable production of second-generation bio-ethanol.
How important is to be the first mover in this market?
There are competing technologies, like syngas and Fischer-Tropsch, which require heavy investment. The Fischer-Tropsch process is an advanced biofuel conversion technology based on the gasification of biomass feedstocks and subsequent synthesis to liquid biofuels. It is a good method but is really expensive in terms of investment. While our second generation bio-fuels technology is still expensive, it is cheaper than competing technologies. Moreover, our technology it is much better suited for distributed application. Of course we want to show the world that we are ready and that can start to build.
How much of a head start do you need?
The US and China, as well COFCO, are pushing to develop second-generation biofuels together with us. In the US, the Department of Energy is also sponsoring alternatives like syngas and Fischer-Tropsch, so it is a race between us and alternative technologies.
I think that this is what the government should do. They should not worry too much about the intricacies of the process, which we take care of. This is clearly a race that involves the whole value chain to bringing these different bio-fuel technologies to the front line. Therefore, we work very closely with the other actor in our value chain.
For example, we work with COFCO who of course in the end will be customers for our enzymes. We connect COFCO with companies. From our other dealings in Europe, Brazil and the US, we have identified elite regions that are specialized in pre-treatment solutions which may be applicable in China. We do not only offer our enzymes, but also our insight in other parts of the value chain which enables us to identify technologies and solutions and present them to partners like COFCO. Similarly, we identified various opportunities to bring fermentation technologies from partners into China. The important thing is that we bring knowledge from the players of the whole value chain to COFCO. The same goes for whatever solutions we develop with COFCO. The agreement is that these can then be used outside China. We certainly try to play a role in orchestrating the value chain as best as we can. I have no doubt that we cover the biggest share of partners in this industry.
The Chinese government set the target of 15% biofuels by 2020 and will probably be exceeded in practice…
From our perspective, this target is certainly achievable in China. During the climate conference that we organized in China as in the context of the visit of Prime Minister Rasmussen, alongside with other Danish companies such as Arkitema, Dong Energy, Grundfos and Dong Energy and the Danish Embassy, we presented a McKinsey report that measured the impact that our products could have in the Chinese market. Of course, biofuels is by far the biggest opportunity and it looks as though 15% is certainly achievable based on this report, especially if China goes for the 2nd generation biofuels. There is plenty of input material, and when our enzymes will be ready in 2010, COFCO will start working with them and will able to design the actual plant.
Looking into the future, if you become the preferred partner of the Chinese government and the key players, what will your impact on the development of the Chinese biofuels market?
That will be a big commercial opportunity for us. As we emphasized, we have already been in contact with most of the delegations that will be coming to COF15, and we have already had a special meeting with the head of the Chinese delegation. We talked about the many good opportunities that we will be facing. A good chunk of this opportunity is the R&D conducted in China, and the advantage is that all the other technology pieces that we are developing in the US, both internally and with our partners, will also benefit from these collaborations. We made an enormous effort to ensure that we can tailor-make and modify the enzymes once we start production in our factories in China. In terms of technology transfer, our aim is to make this technology available and produced in the Chinese market.
You took up your current position several years ago you have elaborated a number of achievements. What would you like to achieve before handing this office to the next CEO of Novozymes?
My personal goal is to make sure is that our technology is utilized with a positive environmental angle. We calculated that if you look at all our products last year, the total saving for our customers by using our products, compared to the process that they were using before, was 23 million tones of CO2. to give you an order of comparison, Denmark’s total annual CO2 emission is 56 million. Therefore, we can safely say that Novozymes makes a significant contribution to CO2 reduction. My goal before I retire is to make a contribution to the world’s future environmental performance. There is a desperate need for people like us to introduce new technologies and contribute to creating a cleaner world. Before I retire I would like to set the company on track to able to do that.
| Company: | Novozymes |
| Position: | CEO |
| Country: | Denmark |