3. 3
Overview
• Introductions
• Discerning Disruptive Innovations – Harvard Business Review
• Case study on disruptive biotechnology in a commodity
chemical
- Apply tools of a six step process to analyze the disruption
• Biological innovations around the corner and the tools that are
enabling them
4. 4
Discerning Disruptive
Innovations
• “How to Identify Your Enemies Before They Destroy You” by
Farshad Rafi and Paul Kampas
• “Disruptive Technologies: Catching the Wave” by Joseph Bower
and Clayton Christensen
• “Meeting the Challenge of Disruptive Change” by Clayton
Christensen and Michael Overdorf
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
5. 5
Discerning Disruptive
Innovations
What is disruptive innovation?
“ Any product, service, process or business model that
creeps up from below an existing business and
threatens to displace it”
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
6. 6
How to Identify Your Enemies
Before They Destroy You
If you are an incumbent…
Tools can identify potential disrupters and formulate responses
If you are an insurgent…
Tools can help you plan or conceal an attack
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
7. 7
The Disruption Process
foothold market entry
main market entry
customer attraction
customer switching Yikes!
incumbent retaliation
incumbent displacement
Disruption can fail at any stage
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
8. 8
Using the Tool
Enlist Train
Define
Tailor Score
Interpret
Sell
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
9. 9
Using the Tool
Customize a list of Rate the Create a
contributing innovation’s disruptiveness
factors at each potential profile and a
stage disruptiveness response plan
Tailor Score
Interpret
A) Team Members rate contributing factors on a 7 point scale
B) Weigh each factor on perceived level of influence/ Consensus
C) Calculate the total score of each stage of disruption
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
10. 10
Contributing Factors (Tailor)
• At each stage of the disruption process, some common
factors can make a disruptive innovation more or less likely
to occur.
• Foothold Market Entry
• Main Market Entry
• Customer Attraction
• Customer Switching
• Incumbent Retaliation
• Incumbent Displacement
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
11. 11
Contributing Factors (Tailor)
• At each stage of the disruption process, some common
factors can make a disruptive innovation more or less likely
to occur.
• Foothold Market Entry
- Higher value niche markets
- Underserved segments/geographies
- Opportunities to market stripped-down markets
• Main Market Entry
- Protective patents/ New technology patents
- Access to suppliers and channels
- Need for capital investment/ Environmental requirements
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
12. 12
Contributing Factors (Tailor)
• At each stage of the disruption process, some common
factors can make a disruptive innovation more or less likely
to occur.
• Customer Attraction
- Price
- Performance, functionality
- Reliability/ Assurance of supply
• Customer Switching
- Conformance to established standards
- Downtime during switching and costs
- Downstream customers and applications
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
13. 13
Contributing Factors (Tailor)
• At each stage of the disruption process, some common
factors can make a disruptive innovation more or less likely
to occur.
• Incumbent Retaliation
- Length of product development cycle time
- Strength of culture
• Incumbent Displacement
- Amount of displacement in current and future markets
- Diversification of incumbent/ Core competencies
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
14. 14
Rating the Disruption – Main Market
Entry (Score)
Forces disabling disruption Neutral Forces enabling disruption
Contributing Contributing 1= some influence
Factors
-3 -2 -1 0 +1 +2 +3 Factors 2= substantial influence
3= very high influence
Presence of Absence of
blocking blocking
patents by
X patents by
incumbent incumbent
Need for Need for small Weight them
large capital capital 1 to 3
X investment
Investment
upfront upfront
Poor access Easy access
to customers to suppliers
and channels X and channels
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
15. 15
Rating the Disruption – Main Market
Entry (Stage Score = 2.0 /2.0 = + 1.0 )
Avg. Score
Forces disabling disruption Neutral Forces enabling disruption
is 6/3 = 2.0
Weighted
Weight Contributing
Factors
-3 -2 -1 0 +1 +2 +3 Contributing
Factors Score
Presence of Absence of
1 blocking blocking (1) (+3) = 3
patents by
X patents by
incumbent incumbent
Need for Need for small
2 large capital capital (2) (+3) = 6
X investment
Investment
upfront upfront
3 Poor access Easy access (3) (-1)= - 3
to customers to suppliers
and channels X and channels
Avg. = 6/3
= 2.0
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
16. 16
Rate all steps in the Disruption
Process
foothold market entry Score
main market entry +1.0
Yes
customer attraction
customer switching No
incumbent retaliation
incumbent displacement
Disruption can fail at any stage
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
17. 17
Interpret (Is disruption a genuine threat?)
• Create and graph a profile for all six stages
• One or four profiles are typical:
1) One or more disabling factors exists
• Disruption is highly unlikely
2) Contributing Factors are neither strongly disabling nor strongly enabling
Disruption is possible but not assured
3) A key stage or contributing factor has a high level of uncertainty
A more aggressive response should follow
4) No factors are strongly disabling and some or all are strongly enabling
• Disruption is highly likely
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
18. 18
What do you do?
Disruption is highly unlikely:
Attend Technology Conferences
Review Market Research Reports
Keep tabs on Emerging Competitors
Disruption is possible but not assured
Monitor competitive landscape
Commission a more thorough analysis
In-house development effort
Explore possible partnerships
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
19. 19
What do you do?
Uncertainty with important factors
Use scenario planning techniques
Develop a response which hedges bets
Shift to a more aggressive scenario
Disruption is highly likely
Aggressive action
Preemptive strike if possible
Acquisition
Launch internal group with authority/resources to catch up
HBR OnPoint 2002 by Harvard Business School Publishing Corporation
20. 20
Case Study on the Development of a
Biological Process for a Commodity
Chemical
Acrylamide
Hand-out
21. 21
Instructions for Interactive Session
• Read case study and think about contributing factors that
either enable or disable disruption for acrylamide
• Divide into teams
• All teams are incumbents
• Each team responsible for a different stage of disruption
process
• On handout write down:
- Tailor/ Contributing factors ( four or less) for your stage
- Assign weights of influence (1 to 3)
- Score and communicate team consensus
- Take 30 minutes or less to complete
22. 22
What is Around the Corner?
• Discerning Disruptive Innovations – Harvard Business Review
How to Identify Your Enemies Before They Destroy You
• Case study on acrylamide
- Six step process to analyze disruptions
- Numerous methods for analysis, but have a systematic
approach
Biological innovations - What is around the corner and
what genetic tools are enabling them?
24. 24
Enzyme Technology
ENZYMES CAN CREATE NEW VALUE
• Provide differentiated product
performance
- Functionality, activity, stability
• More efficient processing
- Fewer unwanted by-products
- Increased plant capacities
• Reduction of harsh / toxic chemicals,
less energy and water use
- Reduced effluent costs
- Lower environmental burden
25. 25
Innovation from Biodiversity and Gene Evolution
DISCOVERY
From the Environment
Biodiversity
Small Molecules
Proteins
27. 27
Natural Discovery
Global Biodiversity Access
All agreements in accord with the Convention on Biological Diversity
Samples Acquired Pending Agreement Ecological Hot Spots
28. 28
High-throughput Screening
Advanced Gene Mining
Flow
Cytometry
Robotics
• Fluorescence
• State-of- -activated
the art cell sorter
• 1 million (FACS)
samples • >1 billion
per day samples per
day
GigaMatrix™
Technology
• 100,000-well plates
• >1 billion samples
per day
29. 29
Innovation from Biodiversity and Gene Evolution
EVOLUTION
Broadest Platform
Improving
Environmental
Genes
Biodiversity
Optimizing
Human
Antibodies
30. 30
Enzyme Optimization Through Directed Evolution
Directed evolution allows the rapid optimization of
enzyme properties such as:
• Selectivity
• Temperature stability
• pH stability
• Km
• Inhibition (Ki)
• Activity (kcat)
• Productivity
Diversa Has Developed Complementary Strategies:
1. Gene Site Saturation Mutagenesis – GSSM™
2. GeneReassemblyTM
31. 31
Innovation from Biodiversity and Gene Evolution
DISCOVERY EVOLUTION MARKETS
PHARMACEUTICAL
AGRICULTURAL
CHEMICAL / INDUSTRIAL
32. 32
Summary of Core .
Technologies
Metabolic Protein Micro Plant
Genomics Path Eng. Expression Biology Fermentation Expression
Diversa’s Enabling Technologies:
• Biodiversity – Unique access and patented approaches to
capture nature’s enormous array of genes and microorganisms
• High Throughput Screening – Ability to rapidly screen
billions of samples per day to find the ideal enzyme or
microorganism
• Directed Evolution – Patented genetic manipulation of
enzymes and small molecule pathways
• Host Engineering – Revolutionary heterogeneous over
expression of enzymes and small molecules
33. 33
Examples of How the Tools are being
Applied Today…
• Hydrolysis of nitriles using biocatalysis (pharmaceutical and
chemical intermediates)
• Breakdown of phosphorous with phytase (animal feed)
• Where does chemistry struggle?
- Biotechnology can be disruptive but also complementary
34. 34
Sequence Homology
Relationships
Nitrilases
Synococystis
Only Nine Microbial
Nitrilases
Rhodococcus
Previously Characterized
Rhodococcus
Gordonia
Alcaligenes
Klebsiella
Pseudomonas
Coma
Bacillus
36. 36
DiscoveryPoint™ Nitrilase
Making Drugs Better
Hundreds of
Novel Nitrilases
• Previously <15
nitrilase reported
and characterized Chiral
• Diversa discovered
hundreds of novel Compounds
nitrilases • Mirrored structures
like right- and left-
Advantages handedness
• Crucial for the
manufacture of
pharmaceuticals and
fine chemicals
37. 37
Lipitor® Intermediate:
(R)-3-hydroxy-4-cyanobutyric acid
More economical route: 99% ee
complete conv.
Lower cost starting material
Significantly less process steps
Produce desired enantiomer with high ee
39. 39
Improved Phytase
for Environmentally Sound Feed
Phytic acid is >80% of Pi in plants
Pi currently added to monogastric animal feed
Phytic acid: Environmental pollutant
High activity phytase: -Removes phytic acid
-Reduces pollution
-Eliminates added Pi
-Increases feed efficiency
40. 40
Improved Phytase for Animal Feeds
P P O
6
P Phytase 6
P
2
HO
2
P 4 4 1
P + HO P OH
P 1
P P 5 3
OH
5 3
P P
Phytic acid
1) Dramatically reduces need for supplemental dicalcium phosphate
2) Evolution technologies have improved performance
3) Achieved heterologous expression for commercial production
41. 41
Where Does Chemistry Struggle?
Industrial Enzymes Chemicals
1. Oligosaccharide Degradation 1. Oxidations – Epoxidation
2. Sugars to Products 2. CN Hydrolysis
3. Delignification 3. C-C Bond Formation
4. Fatty Acid Modification 4. Alkene Hydration, Amination
Look for opportunities:
• Chemoselective
• Regioselective
• Stereoselective
42. 42
The Application of Biotechnology to
Industrial Sustainability*
Other Case Studies:
1. Manufacture of Riboflavin (Vitamin B2) (Hoffmann La-Roche,
Germany)
2. Production of 7-Amino-Cephalosporanic Acid (7-ACA)
(Biochemie, Germany/Austria)
3. Biotechnological Production of the Antibiotic Cephalexin
(DSM, Netherlands)
4. Bioprocesses for the Manufacture of Amino Acids (Tanabe,
Japan)
5. Manufacture of S-Chloropropionic Acid (Avecia, UK)
6. Enzymatic Production of Acrylamide (Mitsubishi Rayon,
Japan)
7. Enzymatic Synthesis of Acrylic Acid (Ciba, UK)
*By OECD: Organization for Economic Co-operation and Development,
2001
43. 43
The Application of Biotechnology to
Industrial Sustainability*
Case Studies (cont.):
8. Enzyme-Catalyzed Synthesis of Polyesters (Baxenden, UK)
9. Polymers from Renewable Resources (CargillDow, USA)
10. A Vegetable Oil Degumming Enzyme (Cereol, Germany)
11. Water Recovery in a Vegetable-processing Company
(Pasfrost, Netherlands)
12. Removal of Bleach Residues in Textile Finishing (Windel,
Germany)
13. Enzymatic Pulp Bleaching Process (Leykam, Austria)
14. Use of Xylanase as a Pulp Brightener (Domtar, Canada)
15. A Life-Cycle Assessment on Enzyme Bleaching of Wood
Pulp (ICPET, Canada)
*By OECD: Organization for Economic Co-operation and Development,
2001
44. 44
The Application of Biotechnology to
Industrial Sustainability*
Case Studies (cont.):
16. On-site Production of Xylanase (Oji Paper, Japan)
17. A Gypsum-free Zinc Refinery (Budel Zink, Netherlands)
18. Copper Bioleaching Technology (Billiton, South Africa)
19. Renewable Fuels – Ethanol from Biomass (Iogen, Canada)
20. The Application of LCA Software to Bioethanol Fuel (ICPET,
Canada)
21. Use of Enzymes in Oil-well Completion (M-I, BP Exploration,
UK)
*By OECD: Organization for Economic Co-operation and Development,
2001
45. 45
Biotechnology is just scratching the surface!
Industrial and Specialty Proprietary enzymes
Enzymes • Sweeteners and biofuels
• Biofilms, water treatment
$3 billion Market • Pulp and paper
Genes, enzymes, small molecules
Agricultural Products
• Crop protection
$66 billion Market • Animal feed additives
• Animal health, nutrition
Chemical Processing Innovative bioprocesses
• Specialty chemicals
$570 billion Specialty
• New polymers
$400 billion Commodity • Chiral compounds
46. 46
Decisions, Strategies and Actions
• Portfolio Assessment
- Opportunities for new products/new markets
- Substitution threats for your products and derivatives
- Short balanced with long-term products/services
• R&D Investment
- Access/expand R&D expertise through acquisitions, and
collaborations with academia and technology companies
- Gain experience and/or develop in-house capabilities
• Capital Investment
- Assess investments in conventional assets
- Process can often be modified
- Fermentation capacity; Incrementally less expensive
Adapted from Industrial Biotech-New Value Creation, Mc Kinsey & Co., 1/23/2003
47. 47
Decisions, Strategies and Actions
• Marketing
- Superior customer understanding about future application
trends
- Create customer pull from new markets
• Human Resources
- Develop biotech profile by hiring experts and chemical
engineers with understanding of biotechnology
Adapted from Industrial Biotech-New Value Creation, Mc Kinsey & Co., 1/23/2003
48. 48
Anonymous
Acknowledge Dr. Medardo Chavez- Diversa
