Novozymes A/S

This case documents the situation facing Novozymes, the world’s leading enzyme producer, as it tries to figure out how best to get American bio-ethanol producers to adopt its second generation enzyme technology, which will allow the production of bio-ethanol from corn husks and other waste products, rather than using corn itself. Adoption of this technology will allow the industry to move past the “food versus fuel” controversy that arose from the use of corn to create fuel. However the economics of producing bio-ethanol using second generation technology are more difficult to justify, even though the costs are falling steadily. As of 2010 there are no commercial scale second generation bio-ethanol plants in existence. This case can best be used to explore the pros and cons of different types of partnerships. Novozymes could “go it alone” and build its own second generation bio-ethanol plant in the US, but the company does not want to become a fuel producer – it is a technology driven bio-tech company, and wants to remain one. It also does not want to compete with its existing customers. Novozymes could just wait for the bio-ethanol producers to decide to adopt second generation technology when they are ready. But the problem with that approach is that battery technology is improving rapidly and no one will need bio-ethanol if electric cars capture the heart (and wallet) of the environmentally conscious automobile driver. The apparent choices for Novozymes are a partnership with a major oil company, a bio-ethanol producer, a farmers co-operative, a venture capital firm, or some combination of these.

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