ANNUAL REPORT 2010
CASE - NOVOZYMES
LEVERAGING GLOBAL EXPERTISE AND RESOURCES TO FUEL GROWTH In their 2010 annual report, Novozymes presented an all-time high revenue of DKK ~9.7 billion and an operating profit of DKK 2.1 billion (22%). This makes Novozymes a highly attractive business in the Nordic region. With 5,200 employees and ten factories worldwide, Novozymes markets more than 700 products in 130 countries.
In 2010, Novozymes’ management set forth an ambitious target of 15% annual growth backed by favourable business conditions and an impressive growth track record. As the world’s leading enzyme manufacturer, Novozymes has an obligation and a constant ambition to stay ahead. One of the methods to effectively reach the target is to constantly invest in growth-related activities and in parallel free up resources to fuel growth. As Novozymes is part of a sophisticated and highly complex industry, it is difficult to achieve acquisitive growth. Novozymes must therefore focus on growing organically and is crucially dependent on the skills and experiences of their employees. Sophistication of global production support functions A key backbone in Novozymes is a production unit called Multi Purpose Production (MPP) which is responsible for all production with ten factories across the world, among others in Denmark, the US, Brazil, India and China. In total, 1,200 of Novozymes’ 5,400 employees work within MPP. As a key business unit within Novozymes, MPP has a vital role in reaching the growth target of 15%. MPP has for many years contributed with significant cost improvements through continuous focus on refining the production processes. However, less focus had traditionally been put on the support functions related to production. This called for an exploration of additional growth enablers within these functions. In spring 2010, MPP thus initiated a three-year strategy process to identify all relevant elements with the potential of contributing to the ambitious growth targets which Novozymes is committed to reach. Two key levers of growth within production support were identified:
The talents were selected from Denmark, the US, Brazil and China, and thus the global mindset was present from the beginning in terms of getting input from all sites. Naturally, the team constellation also took into consideration the obstacles that occur when working together across regions, including language barriers as well as different time zones and cultural backgrounds. The analysis performed by the strategy working group showed that the most effective lever to reduce costs is to move support activities to low-wage countries where Novozymes is already present, i.e. captive offshoring. With salary levels on index 20-50 for low-cost relative to high-cost regions, there is significant potential in moving labour-intensive, trivial tasks to low-cost regions. Knowledge intensive tasks which depend on education level and experience of the employees should be kept in the current regions to ensure the continuous development of Novozymes. The analysis revealed that current support within maintenance, projects and data management were fragmented in Novozymes because all sites have their own support function. The strategy work identified a considerable potential in creating global and virtual Centres of Excellence to leverage the local knowledge and experience. Spurring a global mindset Being a leading global company, Novozymes has come a long way in leveraging the global competences present in the organisation. The current growth focus has provided the incentive for building further upon these competences, and Novozymes has now embarked on a journey to create top-line growth of 15% with an ambition of considerably slower growth in the underlying costs. The activities needed to achieve this have been initiated, and with persistence and clear focus, this will help realise the three-year strategy ambition going forward.
1. Pooling global resources to leverage competences and increase efficiency by establishing global competence centres that combine and enhance knowledge 2. Freeing up resources by moving tasks to low-wage countries, i.e. captive offshoring As these levers require profound analysis and insight into Novozymes’ business processes as well as buy-in from the organisation and consideration of the existing global structure, MPP decided on a comprehensive bottom-up process involving top management and key employees. A primary concern for Novozymes before initiating the work was to take on a truly global perspective. The current organisational structure is regional, and the initial hypothesis from management was that this regional structure would be a major inhibitor for realising the gains of globalisation with sites and employees in multiple locations. Applying a global Novozymes mindset In order to address these two considerations, the MPP management initiated a Talent Programme where Top 16 Global Talents in MPP were selected to be part of a strategy working group focusing on identifying growth potential within MPP.
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