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Breakthrough technologies and Open InnovationValérie André, BASF Future Business GmbH Michael Koch, Science Relations and Innovation Management BASF SELudwigshafen, Germany

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Contents

Introduction BASF

Open Innovation History at BASF

Definition of Open Innovation

Partnership as a fundamental part of Open Innovation

Challenges of Open Innovation

Summary and conclusion

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Expenditures in research and development

Research is key to the future. New technologies and products help us to find solutions for global challenges.

22%

26%

12%

19%

10% 9%

1%

1%

Plastics

Functional Solutions

Performance Products

Chemicals

Agricultural Solutions

Oil & Gas

Other

Corporate Research

ca.€ 1.49

bn

2010 R&D expenditures circa €1.49 bn –world leader in the chemical industry

Since 2005 up to and including 2010: ca. 40% increase in R&D expenditures

Annual sales from product innovations*:

2010: over € 6 billion

2015 (target): € 6-8 billion

* new or improved products or applications, max. 5 years on market

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Central R&D Organization

Currently, ca. 9,600 R&D employees

Ca. 3,000 R&D projects and topics

R&D “Verbund” with ca. 1,900 collaborations

Universities

PolymerResearch

PlantBiotechnology

Research

SpecialtyChemicalsResearch

Chemicals Research & Engineering

BASF Research Verbund

Industry Partners

Research Institute

High-TechJoint Ventures

Thanks to our close cooperation with numerous partners from science and business worldwide, we have created an international and interdisciplinary Know-how Verbund.

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Innovation in five growth clusters

OLED

Fuel cell

Organic photovoltaic

Lithium-ion batteries

Thermoelectrics

More efficient agricultural practices

Healthier food

Plants as renewable raw materials

NanotechnologyEnergy Management

Plant Biotechnology

White Biotechnology

Raw Material Change

Biopolymers

Chemicals through biocatalysis and fermentation

Performance biologicals

Printed electronics

Nano materials

Paintings and coatings

Medical technical devices

Research on thesafety of nanomaterials

From oil to gas

Coal and renewable raw materials

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Growth Cluster Raw Material Change

The goal of the raw material change growth cluster is to enable BASF to replace or supplement oil, the conventional chemical raw material, with alternatives

GOALTo develop new technologies for entry into the existing value-adding chains

STRATEGY

Natural gasOil Coal Carbon dioxideBiomass

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Growth Cluster Plant Biotechnology

Crops with higher yields and higher resistance, e.g., drought-tolerant corn

6 – 10% higher yields under conventional cultivation conditions per product generation

First positive field trials – product submitted for registration

We help farmers to cover the growing demand for better agricultural productivity and healthier food for human and animal nutrition.

Example:

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Growth Cluster White Biotechnology

Fermentative production of vitamin B2 and enzymes for animal nutrition

Enzymatic production of chiral intermediates for the production of medicines and crop protectants

White biotechnology enables the efficient and resource conserving production of (bio)chemical products and the development of completely new bio-based products.

Example

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Contents

Introduction BASF

Open Innovation History at BASF

Definition of Open Innovation

Partnership as a fundamental part of Open Innovation

Challenges of Open Innovation

Summary and conclusion

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Open Innovation has already been practiced at BASF since the beginning

F. Engelhorn Theodore Coupier de Creil

~ 1867:F. Engelhorn obtains via licensing contracts from French chemist Theodore Coupier a better process for the production of fuchsine (without having to use arsenic) and later aniline, toluidine and induline. Source: Die BASF - Eine Unternehmensgeschichte, W. Abelshauser Verlag, C. H. Beck, 2002

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Indigo (1897)

Ammonia (1913)

Vitamine A (1963)

Strobilurins (1996)

Timm Anke, Wolfgang Steglich (University) Hubert Sauter (BASF)

Georg Wittig (University) Horst Pommer (BASF)

Hermann Staudinger (University) Carl Wolff (BASF)

Fritz Haber (University) Carl Bosch, Alwin Mittasch (BASF)

Adolf von Baeyer, Karl Heumann (University) Heinrich Caro (BASF)

Polystyrene (1930)

Break-through innovations by cooperation between science and industry

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Kresoxim-methyl

Strobilurin A from Strobilurus tenacellus

1977 Timm Anke, University Kaiserslautern

Discovery of Strobilurin A

Wolfgang Steglich, University Bonn

Structure of Strobilurin

2001 F 500 Sales Potential: 500 Mio. €

1983 BASF team develops Strobilurins as Fungicides

1995 Kresoxim-methyl

Successful University collaboration and breakthrough technology: Strobilurins

2008 Strobilurin Market: 2600 Mio USD

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Contents

Introduction BASF

Open Innovation History at BASF

Definition of Open Innovation

Partnership as a fundamental part of Open Innovation

Challenges of Open Innovation

Summary and conclusion

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Definition of OI for BASF today What it is (left) and what it is not (right)

Selling of a whole business (incl. IP) or business parts to re-center

on core competencies

Acquisition

Divestiture

Acquisition of whole companies or part of business to improve market access

via portfolio extensionOutside-inOutside IP / competency becomes BASF business / know-how

Inside-outBASF IP / competencycommercialized outside BASF

CoupledCooperation, Alliances, Joint Ventures, Cross-Industry Innovation

BASF internal Collaboration or IP Transfer

OPE

N IN

NO

VATI

ON

not p

erce

ived

as

OPE

N IN

NO

VATI

ON

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The Open Innovation landscape has become very large and complex

BASF internal (1) One Partner *

* Partners: Universities, Institutes, Customers, Suppliers, Competitors, Start-ups, etc.

(2) Several Partner * (3) Crowd *

coord. by BASF

Co-Location

Strategic Partnership

R&D Collaboration / Joint Development

Collab. Busi- ness Model

Cooperation along Value Chain

Strategic R&D Network

Scouting

Joint Venture

Intermediaries / Broker

Expert Networks

Corporate Idea Portal

Customer Innovation WSCross-Industry WS

Public Funded Projects

Licensing

Proprietary OI Platform

Collab. PlatformVenture Capital

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When is it necessary to look for an external partner ?

Core businessCore competencies

Existing markets

Core businessNew technologiesExisting markets

Non core businessNew technologies

New markets

Three main categories of activities leading to different options

One partner Several partners Crowd/Consortium

Increasing complexity

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Opportunities offered by Open Innovation

… accelerate time to market, especially in new business fields

… facilitate transition from products

to systems / solutions

…establish access to broad know-how &

talents across industries and along value chain

Open Innovation can help

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Open Innovation as key success factor for…

Source: Osram

Idea creationIdentification of new market trends

Including additional competencies

Speed up for bringing innovations to market

Identification of lead users

along the value chains

Improving market success

… by using internal & external sources along the whole value chain

Realizing innovative products & business models with external partners

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Contents

Introduction BASF

Open Innovation History at BASF

Definition of Open Innovation

Partnership as a fundamental part of Open Innovation

Examples of Open Innovation

Summary and conclusion

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How to identify the right partner ?

Strengths Weaknesses

Personal network Easy and quick High level of trust

Not always neutral in evaluation- can limit opportunities

Experts network Know the topics best High quality evaluation delivered

Often strong NIH syndrome

Crowd/Internet /Conference/Chance

Range of possibilities increased Cross fertilization possible

Time consuming IP? Trust ?

Partner finds us Specific proposition or business plan available

Strategic fit has to be evaluated

Key Partnership Messages

Build the relationship (trust)

Identify respective weaknesses and fix them

Then establish the partnership

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Contents

Introduction BASF

Open Innovation History at BASF

Definition of Open Innovation

Partnership as a fundamental part of Open Innovation

Examples of Open Innovation

Summary and conclusion

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OI@BASF: Strategic Partnerships with Universities BASF Advanced Research Initiative at Harvard University

Objectives

Executing BASF projects related to the fields Polymer-based formulationsUnderstanding the formation of biofilms on surfacesNew chemical approaches for processesand materials, e. g. exploring CO2 chemistry

Cooperation with 9 Faculty Professors

Focus on new topics and novel concepts

Creating visibility of BASF in Harvardfacilitation of recruitingaccess to innovation circles

Scouting for start-ups

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OI@BASF: Platforms Organic Electronics InnovationLab in Heidelberg

UniversitiesHeidelberg (40%)Mannheim (10%)

IndustryBASF SE, Merck, Freudenberg,

Heidelberg, Roche, SAP (each 8,3%)

Shareholders

BoardBoard

50% 50%

Scientific Advisory BoardScientific Advisory Board

Research & Development5 Competence Centers for OEProjects Forum Organic Electronics

Research & Development5 Competence Centers for OEProjects Forum Organic Electronics

Education and TrainingJoint master program HD - KATraining Lab in cleanroom

Education and TrainingJoint master program HD - KATraining Lab in cleanroom

Transfer and Incubator…

Transfer and Incubator…

ServicesCluster Management iL – Colloquium / Cluster Conference

ServicesCluster Management iL – Colloquium / Cluster Conference

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OI@BASF: Strategic Partnerships Competitors High yield hybrid rice

Higher yielding, stress-resistant hybrid rice varietiesBPS licenses yield-increasing technologies for commercialization in Bayer CropScience’s Arize hybrid rice Market launch by 2020

Advantages:10% more yield over conventional hybrid rice seeds Global, non-exclusive, agreement that encompasses all major rice growing geographies Rice is the world’s largest food crop.

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OI@BASF: Cooperation with start-ups Evolva, Switzerland

Goal of cooperation:

Develop compounds applied to protect crops

Description:

Joint research on the design of novel and optimized biosynthesis routes for selected natural products with crop protection potential

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Summary

Open Innovation has been existing at BASF since the beginning of the company

As markets become more dynamic and complexity of products or solutions increase new competencies are required

Partnership and openness are successful if trust between partners exist

Open Innovation is best adapted for new areas where core competencies are not key

Open Innovation is a strong tool to solve future challenges