Effectuation Stories

          Case studies, lessons and stories about Effectuation!

          Another Man's Treasure - The Agilyx Story

          Crude Ideas
          Good ideas for new companies can come from anywhere. From a frustrated customer, a breakthrough invention, or as Kevin DeWhitt would tell you, from the trash. In 2004, he and his wife founded Plas2Fuel Corporation (now Agilyx) with the idea of taking plastic waste and turning it into something better than money ? crude oil. From a chemical engineering perspective, it makes perfect sense. Plastic is made from petroleum products -why not reverse the process when you're done with the plastic? Simple enough, in theory. In practice, the science turned out to be difficult, the logistic issues many, and the real challenge proved to be turning the idea into a business.

          Start with a Spark
          The new venture cycle can be tricky to ignite. You need a first-class team. You need customers to generate revenues. You need a product to attract customers. And you need cash to build a product. The team's solution was to combine angel investment with a strategic customer willing to assist in the development and deployment of a fully operational prototype. By partnering with their customer, Plas2Fuel was able to construct a complete working system which could be demonstrated to potential customers, provide real-time environmental data to regulators, and optimize the system for full commercial deployment. Perhaps the most important aspect is that both entities are operationally committed to the success of creating an entirely new approach to the problem of waste plastic.

          Tapping the Well
          Today, Plas2Fuel's initial client can convert several thousands of pounds of mixed waste plastic into hundreds of gallons of sweet synthetic crude oil each day. While this is exciting, it is utterly dwarfed by the fact that 26 million tons of plastic are sent to landfills annually in the US, and more than three times that amount are disposed of in Europe and China. Having proven the concept, Plas2Fuel now has to figure out how to scale the business up to be able to handle this enormous quantity of fuel.

          Where's the Power?
          What the Plas2Fuel team has learned is that as remarkable as reversing plastic back into crude oil is, the innovation is having a system both versatile and scalable enough to give clients of any size the power to convert previously unrecyclable plastic into a valuable commodity. By having the option of running many small distributed systems, a small city or recycler, or even a large town can afford to get into the business of producing crude oil locally instead of transporting plastic trash to a large central facility or digging more landfills. And at the same time, the design can scale to meet the demands of huge waste generators, aggregators and large cities with huge "waste streams"รน wanting to get into the business of converting refuse into money by running many of the prototype systems in parallel. Necessity of design has given Plas2Fuel flexibility in how it sells and how it deploys.

          Recycled Ideas
          Starting with the trash might not be the most intuitive basis for new venture, but with the potential to process mixed waste plastic into nearly 250 million barrels of crude annually in the US alone, the opportunity could be worth more than $25 billion . If you scoff, consider that eBay has created a market more than twice that size for people's unwanted household items (translation: trash) in just over 10 years. So if you are looking for a business idea, one of the assets you have might just be one man's trash.

          _______________________________________________

          Stuart Read is professor of marketing, IMD, Lausanne, Switzerland. Robert Wiltbank is assistant professor of strategic management, Willamette University, Oregon.

          *Based on a price of USD$100 per barrel of crude oil.

          Publication: British Airways Business Life
          Author(s):
          Stuart Read

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