Michael Boot
Eindhoven University of Technology, Netherlands
Title: New business models for biofuels
Biography
Biography: Michael Boot
Abstract
Transport fuels like gasoline and diesel are typical commodity goods, having flexible prices and numerous traders. The commodity market is the archetypical competitive market, as it is built on the premise that each individual trader is negligible in size compared to the market as a whole and therefore exerts no influence on the market price. In such an environment, consumption tends to correlate negatively with price, with less product typically being consumed when prices are high. For example, the oil crisis of 1970’s prompted the automotive industry to design more fuel efficient vehicles. Conversely, supply is positively correlated with price, seeing more players entering the market when prices soar. The recent fracking revolution in the US being a case in point.
It is notoriously difficult for new entrants to compete in commodity markets as demand is driven primarily by price and incumbent firms have established comfortable economies of scale. In order for a newcomer to avoid head-on competition, it is necessary to identify niche markets and disruptive them with innovative products that address the (latent) needs of said markets. To this end, a popular framework from innovation sciences, namely Blue Ocean Strategy, is applied to the transport fuel market in this study.
Two Blue Oceans, each representing a hithero uncontested marked space, have been identified, with one inhabited by consumers who would buy fuel if only the price were lower, while the other comprises more upmarket consumers who are less sentive to price.To serve these niche markets, both a low- and high-end disruptive biofuel, have been reversed engineered, respectively. Both are based on aromatic oxygenates, compounds which can be produced from lignocellulosic biomass and have been found to perform well in both compression- and spark-ignition engines.