Jeff Broin, CEO of POET Energy is frequently in the news as a leader for his success in leading the world’s largest ethanol producer.

POET is a leader in first generation of ethanol production and has launched Project Liberty, for developing second generation cellulosic ethanol using corn cobs.

Project Liberty is a $200 million plant being built in Emmetsburg, Iowa, for which POET received an $80 million grant from the Department of Energy to build a cellulosic refinery.

What can we learn from the successes of POET Energy and CEO Jeff Broin?
What are the core principles that POET’s management team utilizes as the world’s #1 ethanol producer, while it remains standing - when other ethanol producers have closed their doors and gone bankrupt? 

While there are no silver bullets, and your business is different from everyone else’s, there are principles and tools developed by those who came before you that can guide you in taking smarter calculated risks. 

Applying the seven PROFITS Principles as a guide for how operate a business effectively, (from the newly released book, Run Your Business Like a Fortune 100: 7 Principles for Boosting PROFITS), you can learn how to use proven best management practices. 

Today’s column addresses three of the PROFITS Principles when applied to POET.

1. Position Only for Growth –
Profitable companies stay focused.  Though there may be several goals, these companies are like laser beams.  They maintain direction and strategic changes are planned, organized and financially assessed.

Clarity of vision
POET is clear about what it wants to accomplish – finding ways to be the most efficient ethanol producer and moving away from all fossil fuel inputs in its processes and plants. 
In 2007 The Energy Policy Act was updated.  There is an expectation that there will be 36 gallons of renewable fuel by 2022, with 21 billion gallons produced from cellulosic ethanol.  POET wants to produce what no other company has been able to produce, a true disruptive technology in the biofuels space.

Maintaining focus for the future
POET continuously finds ways to address the nation’s future needs ahead of its competitors.  In addition to Project Liberty and building the cellulosic ethanol refinery for the future, POET continues its strategic alliance with Novozymes, collaborating on the development of ethanol from cellulosic biomass. Forbes magazine named them both as renewable energy companies to watch.

Expansion focus
POET is always on the lookout for options to purchase production facilities for future growth.  In December they were rumored to purchase the bankrupt VeraSun Energy Corporation, the nation’s #2 ethanol producer.  So far, this has not occurred but speaks to POET’s focus on future growth.

2. Reality –
Operating a business within the current economic and political arena is a minefield for ethanol producers.  POET addresses these issues head-on.  These are some examples.

Facing the critical facts
Congress mandated that the EPA, in 2005, introduce renewable fuel into the nation’s energy supply and to increasing add to the supply each year. This legislation, The Energy Policy Act, resulted in the Renewable Fuel Standard, which required that 5 billion gallons of ethanol be added to the US supply of fuel within the year.  This legislation was updated in 2007 (see above).  POET participates actively in politics and legislation.

US move towards energy independence
POET explores sources for the raw ingredients for ethanol production.  One key way POET is doing this is by developing relationships with farmers – the people who have the resources (corn, corn cobs and corn stovers), by better understanding farmers’ needs and developing alliances with them.  POET does this in anticipation of future ethanol demand – which POET itself is helping to create.

Financial disruption in industry
POET is dealing prudently with its capital structure and financial situation.  Due to debt load and expansion, based on $2.00 bushel corn and upward costs of $7.00 for a barrel of oil in 2006, ethanol producers overextended themselves and now are out of business or facing bankruptcy. 
POET is not independent financially however.  It only owns minority stakes in the ethanol plants that it builds and operates.  This makes for a potentially precarious financial situation and POET is being cautious.
According to the New York Times on February 12, 2009: ‘gasoline consumption is declining even as federal mandates for ethanol are increasing.  The demand for ethanol and cellulosic ethanol may be insufficient.  Essentially it (ethanol) is costly to produce and there are technological hurdles to solve.  Although it can be done, very little, if any cellulosic ethanol is being produced on a commercial scale.’  Thus, POET has many challenges ahead.

Future based on current financial performance
POET is articulate about the current state of its business.  In every interview, management can speak specifically to the costs, acreage, logistics and costs of corn crops, fossil fuels and related expenses.  Company spokespeople demonstrate clarity about their financial performance and their areas of market strength and weakness.  They speak to what is required for POET to become more profitable.  For example, POET purchases corn in advance and uses affordable pilot testing for new projects.

3. Obtain Vital Information
An essential ingredient for a thriving business is obtaining vital information.  POET has a presence at all levels of government, listens to customers and stakeholders and strongly communicates its focus.

Understand your industry
Jeff Broin, POET CEO and his Co-Chairman, Wesley Clark have become the voice of the industry.  Obtaining industry information regarding customers, competitors, advocates and challengers, along with the ability to address these is essential to POET’s mission – and is crucial to its survival.

Know the technologies
Perhaps it goes without saying that a company needs to know the technologies that exist within its industry.  Many do not and remain internally focused.  POET stays current with new developments in science and engineering in both related and non-related industries as the way to develop its own intellectual capital.

Be aware – laws differ
Every state has its own laws.  So do other countries.  For example, Louisiana has a ‘fuel to pump’ strategy where Renergie, Inc. which includes ethanol produced form other feedstocks (not corn), decentralized network of small advanced biofuel manufacturing facilities, market expansion, use of alternative fuel vehicles for State agencies and advanced price preferences, provide jobs for those still unemployed as a result of Hurricanes Katrina and Rita.

POET’s voice
The ethanol industry’s own ‘civil war’ resulted in the emergence of Growth Energy, a new ethanol trade group that is a challenger to Renewable Fuels Association (which has been the leading ethanol voice until now, yet perceived by some as the lobbying arm for Archer Daniels – which raises questions for smaller ethanol producers who are now going out of business).
POET created Growth Energy and when Wesley Clark became POET’s Co-Chairman, he became the organization’s central spokesperson, along with Tom Buis, Growth Energy CEO (previous President of National Farmers Union and a very strong, top agriculture staffer for former US Senate majority leader Tom Daschle.) 

For example, Renewable Fuels Association is not perceived by some as sufficiently aggressive, especially in last year’s anti-ethanol PR campaign by the Grocery Manufacturers Association, and Wesley Clark took the lead.

POET is also at the forefront in the debate regarding raising the current blend of ethanol to gasoline (currently at E10 (10%) to E15 (15%) which pits ethanol producers at odds with other groups including automakers, boating groups, environmentalists and food who say there has not been enough testing. 
POET, particularly Wesley Clark is an aggressive spokesperson for E15. 
The only way to step up demand for cellulosic ethanol is to legislate for a higher blend of ethanol in gas.  
 
POET also speaks out on the issue of indirect land use.  The premise is that when US corn is taken out of the food supply, one indirect result is deforestation, particularly in Brazil.  The argument is that this practice is less carbon friendly than oil consumption because third world farmers now have to plow new fields to compensate for the decrease in the food supply due to using corn for ethanol instead of for food.  This was a consideration in California when the state issued new carbon standards designed to cut carbon emissions by 80% by 2050 and could lead to sharp reduction in ethanol sales in California after 2011.  POET is making sure its voice is heard.
Another important issue for POET is the push for the federal government to work on incentivizing pump conversion and flex fuel vehicle production for E12 and E15.  POET wants to be sure that the industry is ready for ethanol.

It is no accident that POET is growing and profitable.  The company demonstrates all seven of the PROFITS Principles.  The other four principles will be discussed in relation to POET in weeks to come.