Future Growth = Innovation

DSM has a very simple description of its mission: selling solutions that nourish, protect, and improve performance. To do that, it has built an internal culture focused on innovation as the platform for what it calls "focused growth." All five divisions of the company—covering, in addition to pharmaceuticals, nutrition, performance materials, polymers, and emerging businesses—are required to set annual targets for revenues derived from new innovations, which management defines as products and applications introduced within the past five years. Twenty percent of revenues from innovation is the company-wide goal, to be achieved by 2015.

And the drive to connect with change continues. The emphasis is on the Emerging Business cluster, which is itself segmented into three areas, covering: 1) bio-based products and services, such as enzyme crop boosters and wellness/nutritionals that carry a health application; 2) advanced surfaces, to promote greater energy efficiency for durables such as automotive coatings and to lower the cost of establishing tolerability for personal care products [including drugs]; and 3) biomedical technologies and materials, involving capabilities ranging from polymers for joint replacements, implants, and medical devices, to the testing and manufacture of biosimilar drugs. Also on the docket in this segment is regenerative medicine and tissue engineering.

"What we are doing is applying new biotech technologies to improve the materials structure of basic consumer staples. We are helping our customers move from a production model built around petroleum and hydrocarbons to one based on what we call "white biotech"—lightweight, stress-resistant composites derived from a 'clean/green' organic base," says DSM's vice president, marketing and strategy, Paul Sidhu. "In pharma, we are very active in innovation as a CMO as well, so creating new platforms for cost-effective manufacture of complex biologic medicines is a key part of that value proposition."

Ideas from Afar

Another element in the link between innovation and future growth is a commitment to seek out new ideas from non-traditional sources. DSM has opened two new Innovation Centers, in China and India, to supplement an existing facility in Europe. Both Centers will examine opportunities for development of innovative technologies in the five business segments based on the distinctive market characteristics of the two countries. Together, the three Centers have a broad remit, with freedom to take on a concept regardless of source and run with it. Among other things, they manage their own venture capital units that can invest in promising startups.

DSM is also a believer in "reverse innovation;" that is, how ideas that resonate in the resource-constrained countries of the developing world can be applied to help lower costs or generate new demand in the more affluent markets of Europe and North America. The Centers are integral to the achievement of another set of ambitious revenue targets: By 2015, DSM is committed to doubling its annual sales in China, to $3 billion, while growing the business in emerging "high-growth economies" to half of total sales. The intent is to position DSM as the leader in helping these markets upgrade their performance culture, through use of clean technologies as well as new product offerings geared to the interest of a more affluent consumer base in quality of life, health, and wellness.

Sustainability: Movement to Business

It follows that DSM's innovation strategy is rooted in an awareness of larger social trends, led by factors such as the lean production movement and growing consumer interest in products that do least harm to the environment. DSM management interprets these public expectations less as an obligation than as a huge business opportunity. "Sustainability is a competitive differentiator for us," Sidhu says. "Our goal is to help customers perform and function more efficiently, with a smaller footprint on the external environment." Sidhu notes that DSM was early to predict that the "naturals" trend among consumers would eventually create pressures to insert the same ethos into the manufacturing and supply chain.