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.
Reliance on these technologies of the future means that DSM is expanding into virtually every aspect of the "performance culture,"
from human and animal nutrition and wellness/personal care, to diagnostics, medical devices, and implants; small molecule
drugs as well as biologics, and their generic equivalents; machinery coatings and paint; electric/electronic measurements;
public safety and individual security monitoring; and housing materials.
"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
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.