We develop products and technologies that enrich people’s lives, and are constantly on the lookout for groundbreaking developments and trends. Research and development (R&D) as well as innovation are the cornerstones of our success. In 2017, we spent around € 2.1 billion on R&D. In particular new technologies and the advance of digitalization are enabling us to create innovative products, services and pioneering business models. At the same time, digitalization is decreasing the time-to-market for new ideas, creating opportunities we intend to leverage.
Research and development costs by business sector – 2017
Our approach to innovation and digitalization
Our three business sectors Healthcare, Life Science and Performance Materials have established strategies to drive new product developments for the benefit of patients and our customers. The diversity of our business sectors provides us with a breadth of technologies and depth of market know-how, giving us a competitive advantage in developing new products. In 2017, we established an organization to seize this opportunity by facilitating innovation between the individual business sectors and beyond our current strategy. Our new Group function Strategy and Transformation oversees an end-to-end process that ranges from setting the innovation direction, through ideation, incubation and growth of projects, to establishing long-term business models.
We are investing in forward-looking ideas. In deciding where to invest, we analyze current megatrends to determine the innovation fields in which we see potential for new business. We endeavor to identify innovation projects that transcend our current portfolio and develop them from the initial idea all the way to a functioning business model. This can only succeed if our business sectors work closely together– and if we are open to external impetus. Our end-to-end innovation process seeks to achieve exactly that.
Based on this approach, we source and advance ideas and projects from the brainstorming stage onwards. Following the ideation phase, promising projects progress to an incubation and growth phase, where we provide project teams with a suitable environment in which to develop their business models. Project progress is monitored in a lean, gate-based process – applying strong criteria to evaluate the advance of the projects at each gate. All activities are supported by experts in business model design, business development and market research, as well as agile methodologies. The objective is that, after market launch, the new products or services will make a measurable contribution to our business success.
Driving digital innovations
A major focus of our innovation efforts is digitalization. We want to leverage the opportunities this provides to boost our business performance and are therefore increasingly forming new strategic partnerships with organizations that offer different perspectives. We expect to see progress in the following particularly promising areas:
- Research and development: Digital technologies enable us to access and quickly analyze large volumes of data, thereby accelerating our research and development activities. This is especially the case in our Healthcare business sector, where we are working to advance the development of new drugs to provide patients with faster access to effective medicines.
- Supply chain management: Digital technologies help us to better manage our supply chain. By collating all data centrally, we have access to crucial real-time data. This enables us to predict supply bottlenecks around the world and respond promptly, making sure medicines reach their destination.
- Interactions with customers: Thanks to modern data collection and analysis methods, we can make more efficient use of customer-relevant data. This information helps us to understand our customers more fully and facilitates our dialogue with them, allowing us to adapt our products and services where necessary.
- Digital product innovations: Digitalization enables us to broaden our existing product portfolio, for instance to include new digital services. Moreover, we intend to promote health awareness and improve patient treatment through innovative e-health offerings such as DORA (Diabetes Online Risk Assessment).
You can find more information on research and development in our Annual Report 2017.
How we’re driving innovations
The organizational set-up of our research and development activities reflects the structure of our company. In line with their individual innovation strategies, all three of our business sectors operate their own independent Research and Development (R&D) units. On top of that, our Group function Strategy and Transformation has developed a new end-to-end process for innovation both within and beyond its current innovation strategy and is responsible for its implementation. This function reports directly to Stefan Oschmann, CEO and Chairman of the Executive Board.
Our Innovation Committee (IC) oversees the implementation of innovation projects both between and beyond our business sectors. It is tasked with ensuring that the decision-making process for selecting innovation projects is both transparent and consistent, and furthermore reviews the progress of ongoing efforts. The committee consists of senior executives from our Group functions and our three business sectors. If we participate in projects requiring larger-scale investments, the IC consults our Executive Board.
Even though we are open to innovation around the world, many potential partners for innovation projects are based in Silicon Valley, California (USA) – one of the key sites in the global high-tech industry. We are therefore currently building an innovation hub in Silicon Valley to be in closer proximity to the innovation partners there, be it companies or institutions. The head of our future hub is moreover building up a team of technology scouts to tap into the Silicon Valley innovation ecosystem. Also in 2017, we established the China Strategy and Transformation Group, which is responsible for driving our strategy, innovations and digitalization efforts between and beyond our business sectors in this fast-evolving market.
Our strategic Ventures Fund provides up to € 300 million for investments in start-ups. The fund is structured to enable us to invest in external independent start-up companies aligned with the strategies of Healthcare, Life Science and Performance Materials, as well as to invest in brand new businesses.
Our commitment: Protecting innovative ideas
To ensure the fully confidential handling of sensitive information, especially intellectual property in digitalization projects, and to protect our innovative ideas, we adhere strictly to all data protection regulations. Our Policy for Data Protection and Personal Data Privacy defines the standards that govern how we process, save, use, and transfer data. You can find more information on data protection under Compliance.
Spotlight on the Innovation Center
Having started operations in the modular Innovation Center in May 2015, we completed the construction of our new Innovation Center in Darmstadt and moved into the new premises in early 2018. It will be officially inaugurated during our 350th anniversary celebrations in May. The Innovation Center offers our people and external partners an optimal environment in which to cultivate their ideas. We provide the infrastructure needed to advance cutting-edge projects, along with state-of-the-art methods and tools. Our work focuses on the following initiatives.
Synergizing external ideas: Start-ups and cross-industry collaboration
Numerous start-ups are working on new technologies and innovative business models. Our global Accelerator program supports these enterprises in the early stages of their development, with a focus on projects in the fields of our business sectors and other current trends. In return, we gain insights into the innovative start-up scene and are able to identify emerging market trends early on. Moreover, we aim to link these start-up companies with our innovation projects or our business sectors for future collaboration.
Our Accelerator is complemented by hackathons that we supported in 2017 in countries such as Israel, the United States, Germany, and Italy, as well as a Virtual Challenge in Africa. A hackathon is an event at which students and young professionals from various disciplines collaborate to quickly develop solutions to specific issues. We ran Africa’s first-ever hackathon in 2016, which led us to invite the start-up Peach Technologies to join our 2017 Accelerator in Nairobi, Kenya. At this event, they developed an electronic patient file and prevailed against 200 competitors.
The 198 participants of our Virtual Challenge, an online competition, tackled real-life problems in Africa in an effort to devise solutions. Examples included improving healthcare delivery and outcomes, safe food production and water sanitation. We provide six months of funding and support for the best idea to come out of the Virtual Challenge. In 2017, we selected Zelij Invent, a project that put forward a solution for producing flooring products made out of plastic waste. Its application will be fast tracked to the shortlist for the Accelerator.
We also supported the start-up program Highest 1877 run by the Technical University (TU) of Darmstadt. In March 2017, we teamed up with TU Darmstadt to organize a roundtable for entrepreneurs at our Innovation Center, which was attended by around 50 start-up founders and other key actors in the field of innovation and entrepreneurship.
At the end of 2016, we entered into a two-year partnership with the European Space Agency (ESA) through which we hope to leverage synergies in areas such as innovation, digitalization and materials research. Within this framework, in 2017 we joined forces with Airbus to sponsor the Sustainable Exploration Challenge within the ESA Space Exploration Master’s program. The competition is specifically aimed at start-ups and endeavors to find solutions capable of supporting human life in space – for instance by making use of special chemical and biological processes. Furthermore, we hosted the Space2Health hackathon at our Innovation Center in October 2017, where participants developed solutions for specific challenges using data from the health and aerospace industries.
Channeling internal ideas to generate innovation projects
We want to maximize the innovative power within our company, which is why we give our employees around the world the opportunity to present their ideas to us via various channels. Our objective is to identify ideas between our business sectors and beyond our current scope that have the potential to become viable businesses. Within our Innospire (innovation and inspiration) initiative, we encourage our employees to submit ideas for new products, services and business models. The best suggestions are then developed into business plans in a multi-stage process. You can find more information on this topic under Employee engagement.
Since 2015, our Innovation Think Tank has been analyzing current trends and technologies to generate new ideas for innovation projects. Here, we work closely with internal and external experts, research institutes and companies. Through open campaigns, we support idea-givers right from the initial idea through to the development of a business plan. Our employees can submit their ideas online and develop them to maturity with our support through resources such as online courses.
The most promising ideas sourced through these ideation channels become innovation projects. We offer employees the chance to focus on their innovation project by hosting them in the Innovation Center. In addition to financial support we provide a protected ecosystem and dedicated support, as well as clear governance and decision-making to efficiently grow and scale innovation projects into sustainable future businesses.
Innovator Academy: Supporting innovation programs
Within our Innovator Academy, we run needs-based training sessions and workshops for idea-givers, internal project teams, members of think tanks, and start-ups. In May 2017, we launched “traintoinnovate.com”, an online platform that provides the participants in our Innovation Center access to programs with additional information and methods for innovation. Employees can also use this platform for independent study and to share their ideas with others.
Second Displaying Futures Award
The aim of our Displaying Futures Award, run by our Performance Materials business sector, is to support teams from academic and institutional backgrounds. In 2017, the target topic area was “flexible applications in the field of hybrid electronics”. Submitted by creative minds from 22 countries, the number of ideas received rose from 31 in 2016 to 69 in 2017. The three winning teams focused on future-oriented technologies such as portable biomonitoring devices, soft robotics, electronic sensors, and packaging; they were evaluated on innovative value, business potential, and impacts on society and the environment. The Displaying Futures Award is worth a total of US$ 150,000.
Fostering young talent: An investment in the future
Well-trained talent is the best foundation for future innovations, which is why we endeavor to spark young people’s interest in science. Students who are curious about chemistry and biology can use our Junior Lab and livfe BioLab to conduct their own research and experiments. We run both laboratories in partnership with the Technical University (TU) of Darmstadt.
Beyond youth labs, we also partner with various schools in the vicinity of our global headquarters in Darmstadt. For example, we provide STEM teachers with educational materials and organize annual teacher events such as Science Days, where they learn how to incorporate new technologies into their science classes. Moreover, we regularly invite groups of students to our company to explore our research activities and have been hosting the “Jugend forscht” student competition for over 30 years. You can find more information on our educational initiatives under Community.
Maximizing the opportunities of digitalization
In early 2017, we launched a strategic partnership with Palantir Technologies, a California-based company. We intend to use Palantir’s data analysis capabilities to improve and accelerate the development, commercialization and delivery of new medicines.
To harness these capabilities, we have established three joint initiatives. Medical Research & Drug Development aims to accelerate the drug manufacturing process; Global Patient Intimacy intends to enhance patients’ experience with our products, and Global Supply Chain focuses on improving demand-forecast accuracy in our supply chains. As well as these initiatives, we have built capacities for data analysis within our own company. In the future we hope to make use of Palantir technology in all three of our business sectors.
Smart packaging processes and drug information in real time
Our Smart Packaging project allows us to make our drug packaging processes more efficient and flexible. We have connected our packaging machines via the Internet of Things and are currently assessing the potential of this technology to improve the accuracy and reliability of our machines while also increasing their output. Additionally, our new predictive maintenance capabilities will reduce machine breakdowns. By connecting systems across the entire organization and using advanced analytics, we can decrease packaging waste and lead times when changes need to be made to product information. This means that we can pass newly discovered information on to our customers more quickly. We are also exploring options for active packaging that will allow patients to look up the latest information on their smartphones.
Improving customer experience through artificial intelligence
We are currently developing chatbots, text-based dialogue systems that enable people to ask computer systems questions in natural human language – exactly as they would write messages to another person. This means we are available to answer our customers’ questions 24 hours a day. In the future, for example, patients with multiple sclerosis will be able to order refills for their RebiSmart® injection device via chatbot. Future chatbots may even be capable of reminding patients to order extra supplies as soon as they run the risk of no longer observing the recommended dosage. Moreover, chatbots are more cost-effective for us than traditional customer services.
Online diabetes campaign
In Africa, approximately 62% of diabetes cases go undiagnosed. To improve early diagnosis and promote awareness of the disease, we joined forces with various partners in March 2015 to launch a digital initiative known as DORA (Diabetes Online Risk Assessment). Thanks to this initiative, people in South Africa, Namibia, Kenya, Ethiopia, Ghana, Nigeria, Mozambique, and Mauritius can use their smartphones or computers to take an online test. In just a few clicks, they can ascertain how high their risk is of developing diabetes. Since its launch, the DORA website has received more than 740,000 hits, with more than 100,000 coming from people who have taken the test.