Bioenergy PROFITS Principles: “Success = Integrating Your Supply Chain”

by Biofuels Digest columnist Dr. Rosalie Lober

Every element of your business must be interconnected. You spend a great deal of time and effort improving your company’s internal processes, yet how much do you invest in making sure that all your systems and processes work well together? Do you notice any parts that do not belong with the rest?

Integration creates the whole that is bigger than the sum of its parts. It adds cohesiveness and consistency to your business. Work flows from one function to the next seamlessly. Your goals make sense vis a vis every other goal. Your business tells a wonderful story for your customers and employees.
We continue to apply the Bioenergy PROFITS Principles to Amyris Biotechnologies. The focus for this column is the bioenergy principle of INTEGRATION (based on the newly released book, Run Your Business Like a Fortune 100: 7 Principles for Boosting PROFITS, by Rosalie Lober, Ph.D.)

Shun being a risky bet for investors

Investors don’t want to take risks. When something is out of order – whether it is technology, people, marketing strategy – investors say, “No thanks.” In the article, Capitalism to the Rescue – Green Tech Rising (New York Times: October 5, 2008), an interview with venture capitalists makes it extremely clear.

Integration is especially important for companies that are poised for second round investments and in the ‘do or die’ situation. Either they get funding or their survival may be doomed. The well integrated company definitely has the edge.

Amyris Biotechnologies is not a risky bet. Renewable energies may ultimately be about the environment, but it is first and foremost about economics, for the company and for the investors. If the funds aren’t there, no amount of caring about the planet will fully support production requirements.

Amyris proved many times to be a well integrated company. As venture capitalists look for elegance in design and simplicity, Amyris leadership provide the focus and linkage within the company‘s culture and supply chain. With his pulse on both the environment and politics, within the United States and Brazil, John Melo, CEO and his team adjust the company’s strategy as needed. When deciding to work with existing mills to use Amyris technology for production, rather than license the technology to these mills outright, Amyris was discreetly saying, the company is so well-integrated that it can adapt its strategy if that’s what makes sense. This decision stirred up excitement by creating training and support for the mills, something that merely licensing the technology would not necessarily create.

$120 million in equity funding to date from investors like: Khosla Ventures, Kleiner Perkins Caufield and Byers, TPG Biotech and DAG Ventures validates Amyris Biotechnology’s ability to link all functions of the company and provide proof of concept to investors that exudes credibility for continued support.

Finding the secret competitive advantage

Integration is a competitive advantage for successful small and medium-sized companies. With fewer people and less bureaucracy, smaller companies can achieve the advantage of integration, along with speed, cost, adaptability, employee participation, focus and efficiency more easily than a Fortune 100 can.

Amyris is not without impediments – which makes integration so important. Brazil’s regulatory ministries do not necessarily embrace the idea of genetically engineered yeast, which is Amyris’ essential technology. Also, Amyris, at least initially, was an unwelcome competitor in Brazil.

With an integrated company, equipped with a strategy that links to production and a strong operating culture, Amyris has influenced both venture capitalists and governments of the US and Brazil to allow them to move forward. How did they do this? Amyris is able to demonstrate a clear path to commercialization with two pilot plants – one In Emeryville, California and the other in Campanis, Brazil, using Brazilian sugar cane juice and molasses. Their 14,000 square foot facility in Campanis, Brazil clearly integrates and optimizes the Amyris fuels and chemicals manufacturing process. It allows for validation of future production of more than 10,000 gallons of Amyris products representing full-scale manufacturing.

Demonstrate cause and effect

Integration is the “lockstep” approach for aligning and fostering congruency within your company. It is the PROFITS principle that focuses your attention on linking your company’s strategic intent to specific goals and ignoring everything else. This adds cohesiveness to your business – accelerating profitability.

In the worst financial climate in decades, Amyris pushes ahead with its plans to produce 200 million gallons of synthetic biofuel a year at $2 per gallon by 2012. Proof of their serious commitment was realized with completion of its new pilot plant, with 2.4 million gallons of annual capacity.

According to John Melo, “It’s the first time you put all the pieces together and you let it go. From beginning to end it’s a commercial process.”

Especially when funding is scarce, this is a true coup – but it is no accident either.

Amyris has a history of putting the pieces together very well. (See discussion of Successful Companies have Choices, Biofuels Digest, September 15, 2009). In Amyris’ collaboration with the Gates Foundation, OneWorld Heatlh and Sanofi-Aventis, it learned about integrating the company with politics, economics and the greater good.

Ensure internal consistency

What is internal consistency and how does this correlate with integration?
A company that is internally consistent is focused and all parts of the company are linked with every other part. What are you creating for the long-term? Do you have measures in place that support this? How closely aligned are your business functions?

Amyris created a technology platform and related processes that serve as a launchpad for ongoing innovation for varied products. It is like an engine that can generate power for various transformations. Layering on the technology is an infrastructure of supply chain processes. For example, currently in Chicago, the distribution infrastructure is being fine-tuned.

And if you notice how Amyris communicates about its products, the company says things like: “Amyris products are designed to be low cost, scalable and compatible with existing infrastructure with performance attributes comparable to petroleum-based products.”

Emphasis is on a family of products that appear to have a similar strategic intent – low cost, scalable and compatible with existing infrastructure and performance attributes. And, then Amyris compares their performance with the biggest competition – petroleum-based products. Your company can replicate this formula too.

Communicate consistency and linkages

It is not enough to work in isolation – especially if you need and want customers and funding. Stakeholders need to know about you. First and foremost, they want to know what you offer them. They also need to know who you are, what you want to accomplish and what you need from them.

Amyris communicates. Annika Jenson manages Amyris Corporate Communications, an essential company function. Media coverage is key to getting the word out for Amyris. Strong and frequent communication integrates what is going on within the company and grounding it in the world.

For Amyris, a smart step involved taking stakeholders into the world of the Amyris demonstration facility. This facility is the first of its kind in Brazil and will optimize all Amyris fuels and chemicals manufacturing processes. Amyris produces its renewable products by applying its proprietary synthetic biology technology to convert Brazilian sugar cane into a range of high value products.

The Amyris Renewable Products Demonstration Facility includes both the pilot plant and demonstration scale operations and complements the pilot plants that Amyris opened in Emeryville, Calif. in 2008 and in Campinas earlier this year. Amyris now has fully integrated capabilities to move technology from lab to pilot to demonstration and finally to commercial scale with tested continuity of results throughout the chain.

Notice the focus on integration throughout the end to end chain. This is the stuff that investor funds are magnetized to!

Do it now!

When you explore how all the parts of your company fit together, you may find that you begin questioning some of your key strategies. This is positive, though it may require a good deal of work. Sometimes it is difficult to gain clarity. In this economy it is difficult to make decisions that appear to leave money on the table. It is important to give up projects that do not closely align with your purpose and focus. Only you can make these tough decisions. All we can tell you is that a well-integrated company is your insurance policy. To the world outside your company, being well-integrated is attractive and magnetic to your stakeholders and potential funding sources.

Free Subscription to the Daily Biofuels Digest e-newsletter

Subscribe FREE to the world's most-widely read biofuels daily. Enter your email in the box below,

Bioenergy PROFITS Principles: “Success = Integrating Your Supply Chain”

Free Subscription to the Daily Biofuels Digest e-newsletter

Related Stories

Hot Topics

Entry Information

Post a Comment | Trackback URL