September 27, 2011

Open Innovation applied by DSMJaco Fok, VP Business Incubator

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DSM 2010: a company to be proud of!

Employees 21.911

Annual Sales € 8.176 billion

EBITDA € 1.161 billionEBIT € 752 millionNet Profit € 507 million

Capital employed € 5.468 billion

Single A Credit Rating

Strong Corporate Governance

Global #1 or 2 DJSI (Chem. sector ’04 ~’11)

NutritionPerformance

Materials

IndustrialChemicals

31%

37%

9%6%

17%

PerformanceNutritionPharmaOtherPolymer Intermediates

2Page

DSM organization chart

Nutrition

DSM Nutritional Products- Human Nutrition andHealth- Animal Nutrition andHealth

DSM Food Specialties

Corporate Staff

Shared CompetencesBusiness Support

DSM Managing Board

DSM Innovation Center

Pharma

DSM PharmaceuticalProducts

DSM Anti-Infectives

PerformanceMaterials

DSM EngineeringPlastics

DSM Dyneema

DSM Resins

PolymerIntermediates

DSM Fibre Intermediates

Business and markets

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Our world is facing serious challenges…

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Global recession(s)

5Page

Climate Change….. ?

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We cannot leave it up to the next generationto solve the problems

7Page

The chemical industry is ideally positioned toThe chemical industry is ideally positioned toaddress the real issuesaddress the real issues……..

8Page

Our history

Coal Mining CommodityChemicals

SpecialtyChemicals

Life Sciences &Materials Sciences

9PageSlide 9

2000 2005 2010*

PolymerIntermediates

PerformanceMaterials

Pharma

Nutrition

Brea

kdow

n D

SM s

ales

(%

)Others

Petrochemicals

EngineeringPlastic Products

Base Chemicals& Materials

Others

Base Chemicals& Materials

Others

* Excluding discontinued

DSM: Transformation completed

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Our purpose is to create brighter lives forpeople today and generations to come.

We connect our unique competences in LifeSciences and Materials Sciences to createsolutions that nourish, protect and improveperformance.

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DSM in motion: driving focused growth

People - Planet - Profit: creating value along three dimensions

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Innovation

From building the machine to doubling the output

Proud to have achieved

• € 1bn sales from innovation• Increased speed of innovation• Setting up (4) EBAs• Setting up innovation

infrastructure/culture• External recognition as leading innovator

Next level aspiration

• Innovation sales 20% of total sales• EBA sales > € 1bn (2020)• Innovation focus on defined platforms• Value creation via best practices• Set up Innovation Centers in

China/India

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1

2

3

4

5

6

7

8

9

Innovation Aspirations

Innovation Strategy

Idea Generation and Validation

Project Management

Commercialization and Launch

Portfolio Management

External Networks

Organization

Culture and Talent

2.0 2.5 3.0 3.5

Industryaverage

AverageDSM 2006

AverageDSM 2010

Monitoring Innovation Performance

Scale 1 - 4

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Further boosting the innovation performance

1. Focused approach throughinnovation platforms

2. Balance radical andincremental innovation

3. Internationalize: RegionalCenters in China and India

4. Expand open innovation

5. Improving innovation practices:Excellence in Innovation

6. Supporting (corporate)Technology Platforms

ROPUFA® KhepriCoat™

Dyneema® Rovimix® OVN

DeSolite - supercoatings™

Palapreg® ECO

Achieving the next level of excellence in innovation

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EBABiomedical

EBA AdvancedSurfaces

EBA Bio-basedProducts & Services

CTO Office

BusinessIncubator

Venturing

DSMInnovation Center

EnablersNew Business Development

Accelerating and supporting innovation

Excellence inInnovation

Licensing

Growth of the EastFrom reaching out to becoming truly global

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Choose the right hunting areas!

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Balance radical and incremental innovation

• Company wide insight intocomposition of portfolio

• Optimizing the mix between radicaland incremental innovation

• Allows comparison of innovationplatforms

• “Philips 4 x 4 approach”

Improvedoffering

Offering**new

to PMC

Offeringnew

to DSM

Offeringnew toworld

emerging

growth

mature

decline

Mar

ket l

ife c

ycle

Innovation type (proposition is….)

Introduction of portfolio management tool

Enabling company wide steering of innovation portfolio

ExistingPortfolio

RadicalRadicalPortfolioPortfolio

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Prof. Henry Chesbrough

DSM

> 99 %of worldpopulationoutside us!

Openinnovation:networks !

Dare to have it proudly found elsewhere

Why do we need Open Innovation?

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Contrasting principles of Innovation

• Closed Open

• All smart people work for us Most of the smart people do not work for us

• Invent, develop, produce yourself Add internal & external forces

• Discover and get to market as No1 We can profit from outside R&D

• Commercialize quickly Choose the best business model

• Create most and best idea’s to win Use internal and external idea’s to win

• Control your IP to defend positions Profit from other’s and combine with own IP

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Value Creation by Open InnovationValue Creation by Open InnovationFu

zzy

Fron

t En

d

Wel

l def

ined

Rea

r En

d

Interaction/ Synthesis

Intellectual Asset Management

LicensingIn

VenturingSpin in

JointBusiness

Developments

Acquisitions

LicensingOut

Spin out/off

Divestments

R&D services

Market Scouting / Business Intelligence

Competence Development, Technology Intelligence

Open innovation is no longer a competitive advantageIt has become a competitive necessity!

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How to mitigate risks?

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Pros and Cons of Open Innovation

+ Shorter time to market - Info overflow+ Higher chance of success - Culture change is slow+ More funnel output - Many legal contracts+ Lower innovation costs - IP leakage (China)+ Mitigated risk (options) - Balance of power+ Reputation; recruitment - Upfront Investment+ Knowledge based economy - Less job rotation+ …… - …

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Open the Chemical Park: creation of Chemelot

Maastricht

Ein

dhov

en

Bru

ssel

s

Aachen