Smart agriculture and nutritional genomics

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WHAT’S INSIDE?About GMO

About sorghumInvention and innovation

Management of IPRDynamics of innovationFinancing of innovation

Business modellingInnovation ecosystem

Future?ConclusionsReferences

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ABOU

T GMO

10.000 years agoHumans begin crop domestication using selective breeding.

1700sFarmers and scientists begin cross-breeding plants within a specie for desired parts of the plant.

1940sFarmers and researchers seek out additional ways to introduce genetic varia-tion into the genetic pool.

8.000 b.C. 1700 1940

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“Genetically modified crops (GMCs, GM crops, or biotech crops) are plants used in agriculture, the DNA of which has been modified using genetic engineering techniques. [...] We can assure that GMOs are now an important business and that millions of farmers are turning in the last few years into GM crops. GMOs can be the example of a new technology that has been developed by universities and scienti-fic institutions for many years and now is spreading in the markets.”

1940-50sDr. Korman Borlaug, father of the “green revolution”, introduces several revo-lutionary innovations into plant breeding and agro-nomics: he wins the Nobel Prize for Peace in 1970.

2012Farmers worldwide grow more than 420 million acres of biotech crops.

1990sThe first GMO crops are introduced into the mar-ket place.

1940-50 1990 2012

Norman BorlaugNobel Prize winner and

inventor of GMO

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ABOU

T SOR

GHUM

LAND USE High yield on marginal land

WATER USE < 85% sugarcane < 50% corn

ENVIRONMENTAL IMPACT Herbicide and pesticide use < 40-80% corn

ENERGY USE Much less than corn - Less irrigation; fewer chemicals

CLIMATE CHANGE Naturally heat and drought tolerant

Sorghum (Sorghum bicolor), also known as milo, has a variety of uses including food for human consumption, feed grain for live-stock and industrial applications such as ethanol production.The sorghum is very used wor-ldwide, in the most developed countries for feeding animals and biofuel, while in some parts of the world as food for people. The new technologies and the development of the sorghum culti-vation creates great changes in the market and in general in the prices of the product.

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CHRO

MATIN

INC.

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BASICRESEARCH

APPLIED RESEARCH

PRODUCT DEVELOPMENT DIFFUSION

INVE

NTIO

N AN

D IN

NOVA

TION

2001 2006 2010 NOW

PROD

UCT P

ERFO

RMAN

CE

TIME OR ENGINEERING EFFORT

The company clearly stays in an intermediate stage between product development and diffusion because they constantly create new kind of seeds depending on the situation but at the same time they have started to sell their products.The company has an evolutionary approach. In the S-curve is situated on the initial part: the performance of its products is supposed to increase.

CHROMATIN AT THE START OF DIFFUSION

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From a SUPPLY SIDESuppliers: worldwideProducers: (small) businesses growing sorghumResearch and education: natural breaking genomics – network of sor-ghum growers; alliance with other companiesComplementary systems: “broad and established community base”Product: sorghum (animal food, biofuels and energy, brewing and glu-ten-free nutrition).

From a SOCIETY SIDESustainability: high yield, efficiency, drought tolerance, cultivated on marginal land (expandable up to 80% of agriculture land), renewable fuelsBeliefs: low-impact energyNeeds: food availability, alternative energiesObjectives: food equality

The company is likely to expand its market (also geographically), like projecting its growth in the field of feedstock for biofuels. Neverthe-less the company has to continue the research to meet the persona-lized needs of its clients.

CURRENT PARADIGM AND FUTURE PERSPECTIVE

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The company starts from an existing technology and tries to improve it with the aim to answer the increasing demand of food in the world facing with different pro-blems such as: limits of arable land, water scarcity and demand for food (demand pull).The product is designed to be more suitable for each region of the world for avoiding some problem of tra-ditional agriculture such as the large amount of water required and the use of pesticides.

TYPES OF INNOVATION

GENE STACK ASSEMBLED MINI-CHROMOSOME IMPROVED CROP

Higher yieldMore nutritiousMore biomassHigher value products

BENEFITS

Accelerates product develop-ment pipelines

Any crop

Faster development, lower costs

Streamlined regulatory process

VALIDATION

Peer-review publications

17 issued patents> 40 applications pending

MINI CHROMOSOMES

Single-step gene stack delivery into plants

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“We have demonstrated that sorghum can be modified to produce significantly elevated quantities of farnesene relative to commercial inbred sorghum lines, a molecule that can be used to create ener-gy-rich biofuel. To achieve this result, we added and expressed up to nine genes, creating an entire biosynthetic pathway in sorghum. Chromatin’s unique expertise in gene stacking has enabled us to combine more genes than previously reported in this crop.”

Ken Davenport, Chromatin’s Chief Technology Officer

Chromatin Inc is an entrant because it tries to supply a new glo-bal need with a new technology. Furthermore this company was founded in 2001, entered the market in 2006 and started selling globally in 2012, therefore it’s relatively young, even though the sector itself isn’t an old one.

INCUMBENT OR ENTRANT?

Daphne PreussCEO of Chromatin Inc.

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It is suggested to work on the production to find cheaper and easier way to produce GM sorghum, to make the technique more competitive in the world cereal market. It is also important to focus on the safety of the product as well as predict and analyze the long term effect of feeding animals, and indirectly humans, with this kind of products.

IMPACT ON SOCIETY

There will be an higher amount of food on the global market and then also more cereals for the pro-duction of Bio-fuel. The production of more sorghum will also inflict the price of the meat and, in ge-neral, the global prices of the food mar-ket, in fact we will have more products and, in general, a lower price.

ACTING PROPOSALS

Charles MillerVice President of BD

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MANA

GEME

NT O

F IPR

Feedstock Traits

Molecular Breeding

TransgenicBreeding

Value-added Hybrids

Proprietary TechnologyProductionpartners

FEEDSTOCK PRODUCTS

In the technological domain of Chromatin Inc. the best suited instrument to protect the products is a combination of patents and accurate trade secrets. Chromatin competi-tive advantage is based on proprietary te-chnologies over which the US patent office granted them an exclusive right (Mini-Chro-mosome rights in plants) and it is backed by a portfolio of 17 patents as main applicant and more than 40 as co-applicant. Copyright is not useful in GMOs field while trademarks are only exploited to register and protect the na-mes under which GMOs are commercialized.

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IP PORTFOLIO AND STRATEGY

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Number of patents applicants per year

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In/Out licensing is not used because there is neither the need for establi-shing a standard nor is the sold product linked to precise complements; internal exploitation is what they are currently doing. They are trying to apply their core competences in modifying the genetics of the seeds to several fields (biofuels, animal food, gluten-free food, brewing).

In these info graphics an overview of the competitors of Chromatin in the sorghum market (above on the right) and in the GMO technological field related to sorghum (below on the right) is depicted. On the other hand, the distribution of Chromatin’s patents in the different domains can be seen below.

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Applicant companies for patents related to sorghum

Applicant companies for patents related to sorghum and mini-chromosomes

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DYNA

MICS

OF I

NNOV

ATIO

N

The actual customers of the chromatin inc are the early adopters for the following reasons: the product is quite well known even if there is still a big potential for expansion all over the world since the company started to sell on a large scale just from 2012. Moreover, modifi-cations to the product are performed internally with a continuous collaboration with its customers.Given this, we can say that the Chromatin Inc. is at the first phases of the diffusion of its products. The main type of diffusion is the innovative one focusing its ad-vertisements on the efficiency and potential of its pro-ducts. Especially if we consider that the company uses its product in very different fields that go from food to biofuel industries. By growing the number of customers within the coming years, it will probably occur also an imitative type of diffusion.

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Anyway there is still a certain ratio of uncertainty in the market and primary attention of the company is not on the final product but on the process that it has de-veloped during the years.

0.0

10

20

30

40

50

00 01 02 03 04 05 06 07 08 09

1-2 GENES

3 GENES

% S

TACK

ED T

RAIT

S

MOORE’S SEGMENTATION

Jeff WiderExecutive vice-president

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Gmo sorghum can be cultivated on over 80% of the world’s agricultural land and requires fewer nutrient inputs and far less water than other crops. This results for customers in a larger production with relatively low costs. Moreover adding up to nine genes to sorghum, the company proved

> 25%

10-25%

5-10%

< 5%

WORLD SORGHUM CULTIVATION(% of national arable area)

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that it’s possible to produce a large amount of farnesene , a molecule that can be used to crea-te energy-rich biofuel. In order to convert farne-sene to biofuel, customers will need to strongly update their production workflow.

DIFFUSION

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The Abernathy-Utterback model individuates three stages of the diffusion of a new product. In the case of Chromatin Inc. is in the second of the previously men-tioned three, were performance significantly start to improve, sales are growing but not booming and the gradual emergence of a dominant design produces the number of firms.

Innovation is not primarily focused on the product but rather on the process of production, and this is confir-med by the concentration of the Chromatin Inc. atten-tion on their genomics techniques rather than on parti-cular seeds or the final products.

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20,0

40,0

60,0

80,0

100,0

120,0

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200,0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Global area of Biotech corps (milion hectars) GLOBAL AREA OF BIOTECH CROPS (MILLION HECTARS)

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DOMINANT DESIGN

At the present situation Chromatin Inc. does not have a dominant design for different reasons: the product is really customized and changes and also the process can change from one producer to another. For example Monsanto (a big company in agricultural industry) have a brand called DEKALB which has outstanding yield po-tential, DuPont Pioneer (another competitor), a biotech-nology seed company, also has more than 20 sorghum hybrids. In the future it is possible that a dominant desi-gn will appear from the feedback of the customers. For example manufacturer may prefer cubic shaped seeds for lower storage area and better transformation and distribution.Talking about standards the firm does not have stan-dards as common intended but the FAO has a standard for Genetically Modified Organisms providing Chroma-tin a set of assigned steps which they need to follow in the production of sorghum.

The company has started selling its products worldwide so the main part of R&D has been already completed. However for the nature of the market in which it ope-rates there is the need to continue to innovate with the aim to make the product more suitable to each appli-cation. Moreover the cereal global market is not stable and it goes up and down every year so it is really impor-tant to look continuously at it and also to the trend of the different markets in which the company’s products are used (biofuel, food, feed for animal and so on). In addition, to continue to increase their sales is prefe-rable to look for new areas of application of sorghum and find new countries where to sell it.

ROADMAP

5000

10000

15000

20000

25000

30000

1960 1970 1980 1990 2000 2010

1000

MT

Year

USA Sorghum Production

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The entrance of banks in the portfolio of investors of a firm occurs when the early-stage phase is left behind and the enterprise starts being recognized as a reliable business which, however, still has a significant potential for expansion. This shift in the company lifecycle is reinforced by the fact that the VC Physic Ventures recently placed Chro-matin Inc. in its past portfolio, highlighting the move-ment of this company from an early-stage phase to an expansion phase when the company will be an establi-shed player on the market. Chromatin Inc. showed also their stepping from start-up to a serious player on the sorghum market when in July 2014 they acquired the companies Sorghum Production and Supply Company, Production Seeds Plus, Inc. These are the second and third seed companies Chromatin Inc. acquired which allows them to expand their busi-ness, both in the domestic and international markets.

FINAN

CING

OF I

NNOV

ATIO

N

January 2015 July 2014

12.5 million $ lent by The PrivateBank First intervention of a bank

Series F financing round 12 million $ raised completely funded by VCs

January 2015 Series E financing round over 70 million $ raised

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BUSI

NESS

MOD

ELLIN

G

Growers

Distributors

Agricultural Departments

International Organizations

Governments

Academic Institutions

Research

Production

Information Gathering

Consulting and other services

Employees

Satisfied Costumers

Land

Patents

Know-‐How

Machinery

More Resistant and Efficient Seeds

Customized Products

Breeding Quality

Marginal Land Exploitation

Agronomic Support

Environmentally Friendly Products

Online Services

Direct Contact (﴾dedicated phone line)﴿

Consulting

Co-‐Creation

Sales and Marketing Teams

Global Network of Distributors

Dealers, Agents, Growers

Agricultural Industries

Biofuel Production Industries

Biotech Industries

Biochemical Industries

Food Industry

R&D Employees Salary

Machinery Support Services

Land Ownership (﴾Taxes and Maintenance)﴿

Network Development and Maintenance

Direct Seed Sales Paid Services

Grants from State and Public Organizations (﴾Subsidies)﴿

KEY PARTNERS KEY ACTIVITIES VALUE PROPOSITION COSTUMER RELATIONSHIPS COSTUMER SEGMENTS

CHANNELS

REVENUE STREAMESCOST STRUCTURES

KEY RESOURCES

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Growers

Distributors



Governments


Research

Production

Information Gathering


Employees

Satisfied Costumers

Land

Patents

Know-‐How

Machinery

More Resistant and Efficient Seeds

Customized Products

Breeding Quality


Agronomic Support

Environmentally Friendly Products

Online Services

Direct Contact (﴾dedicated phone line)﴿

Consulting

Co-‐Creation






Biotech Industries


Food Industry



Land Ownership (﴾Taxes and Maintenance)﴿

Network Development and Maintenance




CHANNELS


KEY RESOURCES

CANVAS “AS-IS”

Troy RandolphCFO

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Growers

Distributors



Governments


Research

Production

Information Gathering and Sharing


Education

Branding

Employees Satisfied Costumers

Land

Patents

Know-‐How

Machinery

More Facilities

Long Term Safety

Cost-‐Efficiency for Farmers

More Resistant, Efficient, Higher Nutritional Value of Seeds

Customized Products

Breeding Quality


Agronomic Support

Sustainability (﴾less pesticides and water)﴿

User-‐friendly Website

Consulting

Co-‐Creation

Customers Community


Web Advertising and Selling



Magazines, Articles

Sponsorship

Small and Medium Size Farmers in Hard Climate Conditions and

Marginal Land



Biotech Industries


Food Industry (﴾Gluten-‐Free)﴿



Land Ownership (﴾Taxes and Maintenance)﴿ Education

Network Development and Maintenance Advertising




CHANNELS


KEY RESOURCES

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CANVAS HAS “TO-BE”

Growers

Distributors



Governments


Research

Production

Information Gathering and Sharing


Education

Branding

Employees Satisfied Costumers

Land

Patents

Know-‐How

Machinery

More Facilities

Long Term Safety

Cost-‐Efficiency for Farmers

More Resistant, Efficient, Higher Nutritional Value of Seeds

Customized Products

Breeding Quality


Agronomic Support

Sustainability (﴾less pesticides and water)﴿

User-‐friendly Website

Consulting

Co-‐Creation

Customers Community


Web Advertising and Selling



Magazines, Articles

Sponsorship

Small and Medium Size Farmers in Hard Climate Conditions and

Marginal Land



Biotech Industries


Food Industry (﴾Gluten-‐Free)﴿



Land Ownership (﴾Taxes and Maintenance)﴿ Education

Network Development and Maintenance Advertising




CHANNELS


KEY RESOURCES

Private funds

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In order to assess the consistency of the business model the starting point is the analysis of the value proposition characte-rizing Chromatin Inc. It can be considered a Business to Busi-ness and the main customers, as they are depicted in customer segments, are well acquainted with the GMO techniques so that we can define our sector as specialized and value driven. Accor-dingly, customer relationships and channels are selective and concentrated towards a narrow group of customers. These customers are the primary source of revenues alongside public and private organizations, which provide financial support. In order to be able to sustain this offer the company needs support from both public external actors and members of its network, which are listed in the key partners section. To enable the key activities of the company, such as research, and pro-duction of goods and services, required resources ranging from employees to patents with the other listed in the canvas must be taken into account. Each of these resources has obviously some cost.

CHECK FOR COHERENCEMODEL “AS-IS”

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Since Chromatin CEO stated that the company aims to become a global leader in the sorghum market, we believe that the future strategy of this company should be focused on its core business of genetically modified sorghum seeds, enhancing production and sales worldwide. In order to do this R&D is a basic tool and also marketing should find a suitable way to communicate to potential interested users the advantages of the firm’s offer. In addition to this approach, consumers awareness should be ari-sen through a targeted education obtainable through partner-ships with universities and several governments. Governments would also be significant in the role of financial supporters and providers of legal approval of the specific techniques applied by Chromatin. This endorsement implies that the methods are not hazardous to human health which, would not result, should be guaranteed by careful research and even, certified by universi-ty’s publications and food institutions (like FAO). More opera-tionally speaking, Chromatin should expand the number of pro-duction facilities all over the world so that its distribution cost are not prohibitive even for small and medium farmers, which could represent a novel customer segment. Local production can facilitate marketing and approval by local customers.

STRATEGYMODEL HAS “TO-BE”

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THE I

NNOV

ATIO

N EC

OSYS

TEM The institutional actors

should operate by mo-difying and enlarging the ecosystem to other sta-tes and governments. As far as the food market is concerned, only the cre-ation, where not present, of GMO regulations by international institutions (such as FAO) in going to enable additional invest-ments and so innovation. The above consideration will become actual only by assuring the long term sa-fety of GMOs, task which need to be accomplished by universities and resear-ch centres.Therefore this will guaran-tee an easier diffusion and so a faster evolution of this technology.

CHROMATIN INC.

US GOVERNMENTAND STATES

UNIVERSITIES &RESEARCH CENTERS

FAO INTERNATIONAL ORG

FINANCIAL INSTITUTIONS

KNOW

HOW

WITH

TECH

.

PEOP

LE

STAN

DARD

S

S: Challenging the problem, biofuelW: World rules regulations

S: R&DW: Not already able to prove long term safety

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CHROMATIN INC.

AGRICULTURAL DEPARTMENT

US GOVERNMENTAND STATES

FINANCIAL INSTITUTIONS

COMPETITORS

CUSTOMERS AND NETWORK

SALES

FEEDBACK

REGU

LATIO

NS

GRAN

TS

FINAN

CING

FOR

R&D

S: PartnershipW: Money effort linked to results

S: Demand pullW: Lack of trust in GMOs

S: Technology competitionW: Smaller “slice of the cake”

S: Money effortsW: Strict regulations

INNOVATION

FUNDS

S: Money injection at each stageW: Money effort linked to results

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FUTU

RE? GREEN MOOD ON

SORGHUM BIO-FOOD

SORGHUM THE DIET

OF FUTURE

SORGHUM

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Innovation at any time is correlated with the level of techno-logy at that moment.Nowadays, innovation is often associated with ICT sector because of media, but we experimented that it could be even more decisive in the agricultural market, due to the large social and economic impact on the world life.In our case, the application of new methods, such as intro-ducing GMOs, opens a new window towards new market environments which directs companies to more innovati-ve methods in order to sell their products. In parallel, agri-culture related companies should seek for more optimized processes with the aim to produce newer efficient products to more satisfy existing customers and absorb new markets worldwide. Furthermore, through innovative methods they should continuously keep an eye over future to strengthen their roots in the market land.We can expect a challenging business for CHROMATIN INC. within few years since the technology it uses is opening its space not only in agricultural industry but also in the biote-ch and biofuel industry.Despite this possible trend of growth, the company will also face with rising controversies about ethical implications, especially concerning the possibility to sell GM sorghum for feeding people all over the planet. Who knows what the role of innovation will be in this regard?

CONC

LUSI

ONS

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agmrc.org

indexmundi.com

ncsu.edu

“Chromatin, Inc. Closes New Financing Round, Adds Private Equity Investors”

reuters.com

published: January 09 2014; accessed: March 10 2015

“Chromatin adds another $12m in Series F”

agfundernews.com

published: January 20 2015; accessed: March 10 2015

“Chromatin, Inc. Secures $12.5 Million Credit Facility with The PrivateBank”

viralnewschart.com

published: July 09 2014; accessed: March 10 2015

“Chromatin, Inc. Acquires Sorghum Production and Supply Company”

finance.yahoo.com

published: July 23 2014, accessed: March 10 2015

REFE

RENC

ES

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Mirco AlberiniFilippo Bacilieri

Matteo Botto PoalaMassimo Buratto

Claudio Giuseppe CarnabuciAndrea GoviMehdi Hadi

Pasquale ManganoAndrea Marchini

Olushola Tomilayo OlapadeFrancesco Regazzoni

Srna Tulić

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Smart agriculture and nutritional genomics