Innovation Center

Innovation is about creating business from knowledge. The DSM Innovation Center ensures that the company always has a robust innovation pipeline. 2016 was a positive year for us, not just in terms of scientific achievements and financial performance but also regarding the holistic way we think about innovation at DSM.

Rob van Leen, DSM Executive Committee

Innovation Center

x € million
2016
2015
   
Net sales
167
155
   
Organic sales growth (in %)
6
(11)
Adjusted EBITDA
1
(9)
Adjusted operating profit
(24)
(43)
Capital expenditure
32
34
Capital employed at 31 December
576
560
R&D expenditure
75
82
   
Workforce at 31 December (headcount)
619
630

DSM Innovation Center

The DSM Innovation Center has two main functions. In the first place, it serves as a center of excellence to accelerate the innovation power and speed of our core businesses. In this role it also focuses on adjacent technologies for growth through its Corporate Research Program, which is steered by the Chief Technology Officer through the DSM Science & Technology Department, as well as through the DSM Venturing & Licensing activities. In its second function, the Innovation Center has a business development role, focusing on areas outside the current scope of DSM’s business groups. It identifies and invests in new and innovative growth options, initially through the DSM Business Incubator. Moreover, the Innovation Center is responsible for developing and extracting value from the company’s Emerging Business Areas (EBAs).

The Innovation Center made good progress in its results in 2016 with 6% organic growth, driven by higher volumes in both DSM Biomedical and DSM Advanced Solar. Profitability clearly improved due to a combination of organic growth, more focused innovation and reduction of costs. Adjusted EBITDA in 2016 achieved break-even, in line with the ambition of Strategy 2018.

Enabling DSM's Bright Science

As a science-based company, the ability to deliver innovative products and solutions is essential to DSM’s business success and positive societal impact. As a center of excellence, our Innovation Center plays a central role in guiding, enabling and accelerating innovation and R&D across the company.

R&D is instrumental to the realization of DSM’s innovation strategy. Most of our expenditure in this area is directed toward business-focused programs, underpinning our science-based, sustainable solutions.

R&D expenditure (including associated IP expenditure), continuing operations

x € million
2016
2015
   
Nutrition
205
223
Materials
124
143
Innovation Center
75
82
Corporate Activities
22
16
   
Total
426
464
Total as % of net sales
5.4
6.0
Staff employed in R&D activities (total DSM)
2,055
2,036

DSM has seven essential scientific competence areas which are key to the company’s continued success. These competence areas are in analytical, biological, chemical, engineering, macromolecular, materials and nutritional sciences. One of the Science & Technology Department’s objectives is to ensure that DSM has the right combination of skills, capabilities and partners to maintain and deliver on these competence areas. The DSM science network is made up of more than 2,000 internal scientists, including 25 professors and academic associates, working around the globe. They co-operate extensively with external R&D institutions, both in specific, bi-lateral, academic collaboration efforts as well as in broader public-private partnerships, such as the Bio-based Industries Consortium. For more information on R&D and innovation partnerships in 2016, see Open innovation.

DSM filed over 220 patents in 2016. This is somewhat below our long-term average. It reflects our changed business portfolio and further focus in innovation projects, in particular aimed at delivering business impact in specific innovation growth areas.

We initiated a program to establish a new shared Materials Sciences Center to better service the Materials businesses’ current and future science needs. Joining forces across the Materials R&D organization will boost the ability of R&D to play a crucial role in the future growth and competitive position of the Materials businesses.

DSM Venturing & Licensing

DSM Venturing invests in early-to-late stage innovative companies in areas strategically relevant to DSM’s current and future businesses. Our portfolio consists of 25 active investment companies, and each year DSM Venturing reviews well over 500 new candidates. In 2016, DSM Venturing identified and added promising new investments in several start-ups, and also appointed two highly experienced venture investment managers.

DSM Licensing consists of a group of Certified Licensing Professionals and offers professional licensing expertise across all DSM businesses for intellectual property-intensive deals, such as joint development agreements, technology acquisitions and sales, as well as in-, out- and cross-licensing deals.

Developing new business for DSM

Emerging Business Areas

DSM’s EBAs provide strong long-term growth platforms in promising end-markets that are based on the company’s core competences in health, nutrition and materials. DSM has three EBAs:

  • DSM Biomedical;
  • DSM Bio-based Products & Services; and
  • DSM Advanced Solar.

Taken together, the EBAs delivered €16 million in Adjusted EBITDA in 2016.

DSM Biomedical

DSM Biomedical partners with the medical industry worldwide to shape the future of biomaterials and regenerative medical devices that improve patients’ lives. With global reach backed by a leading research and distribution network with facilities in the US and the Netherlands, DSM Biomedical’s portfolio, technologies and expertise enable medical device companies to advance care across medical specialties. These products address key trends in medicine, from treating an aging population to supporting more active lifestyles − meeting the need for safer, less invasive procedures that are also more cost-effective.

Through our investment in research and our state-of-the-art capabilities, we are able to create, develop and produce innovative materials for our customers, as well as components, sub-assemblies and full medical devices. Our portfolio of high-quality biomedical materials includes biomedical polyurethanes and polyethylenes (PE), resorbable polymers, ceramics, collagens, extracellular matrices, silicone hydrogels, device coatings, and drug delivery platforms. These are used in applications in some of the world’s most attractive high-growth markets, including orthopedics, sports medicine, cardiology, ophthalmology, diabetes management, and general and reconstructive surgery.

While the global market for medical devices keeps growing, the healthcare sector overall is still undergoing significant change. Increasing cost pressure on healthcare providers is continuing to drive consolidation and cost focus throughout the continuum of care. A shift is underway toward value-based care; with this comes a drive to demonstrate proven clinical results, offer solutions that speed patient recovery, and provide additional value and/or bundled pricing in combination with quality products. Traditional medical device companies are developing into overall solution providers to hospitals and are focusing less on internal R&D, preferring to buy in novel innovations from third parties. These dynamics present medical device suppliers with new prospects and opportunities to capture the emerging R&D gap.

DSM Biomedical aims to outpace market growth with focused developments in high-growth segments of the medical device market including cardiology, neurology, ophthalmics, diabetic care, and orthopedics. Primary growth drivers are PE fibers in the cardiology market, Svelte DISCREET® (the first commercially available amino acid-based polyesteramide bioresorbable drug-coated stent), and the continued growth of synthetic bone graft substitute products. The year 2016 saw new product launches in coatings and PE supplements, plus solid growth in established products (bone graft substitute, PE and polymers).

The Actamax joint venture together with DuPont reported very promising results from a 12-month, long-term follow-up study on the clinical use of its novel sprayable adhesion barrier device. Actamax has been making good progress to initiate clinical testing in the US market.

Other developments in the year included reinforcing our market-leading position in biomedical UHMWPE (DyneemaPurity®), establishing a partnership with Vention to provide customers with single-source access to coated medical devices, and developing an advanced breakthrough DSM proprietary drug delivery technology for the treatment of glaucoma.

DSM Bio-based Products & Services

As the world increasingly seeks alternatives to fossil resources and progresses toward a more sustainable, bio-renewable economy, significant commercial opportunities are presenting themselves in advanced biofuels and in renewable chemical building blocks such as bio-based succinic acid. DSM Bio-based Products & Services pioneers advances in biomass conversion and seeks to demonstrate the commercial viability of sustainable, renewable technologies in collaboration with strategic partners in the value chain. The development and supply of high-value knowledge, ingredients and expertise in the field of bio-conversion technology are critical success factors. Our strategy is to license our technology and expertise to bio-based entrepreneurs, enabling them to convert biomass in a commercially viable and sustainable way.

Cellulosic bio-ethanol

The POET-DSM Advanced Biofuels joint venture has a commercial-scale production facility for cellulosic bio-ethanol in Emmetsburg (Iowa, USA). It processes corn-crop residues through a bioconversion process using enzymatic hydrolysis followed by fermentation. Work in 2016 focused on bringing the plant to continuous production and toward full capacity, and progress was made during the year on addressing the pretreatment issues. This facility is the first and, to date, the only commercial-scale producer of so-called ‘2G’ (second generation) cellulosic ethanol in the US. See also Note 10 Associates and joint ventures.

We are furthermore leveraging the expertise and products DSM has built up in 2G to create new business in making the production of all generations of bio-fuels more efficient and sustainable. We work continuously on advances in yeasts that further increase ethanol yield. In June 2016, DSM announced a joint development project with ICM, Inc. ICM has developed a way to integrate a process for converting corn fiber to cellulosic ethanol with existing ‘1G’ (first-generation) ethanol plants, for which DSM is supplying its advanced yeasts. Superior performance has been demonstrated through multiple continuous runs at the ICM pilot plant.

Bio-succinic acid

The Reverdia joint venture between DSM and Roquette operates its Biosuccinium® plant in Cassano (Italy), where it produces high-quality bio-succinic acid. Reverdia is recognized as the technology leader in this field, and was awarded the number one spot in the 2016 ‘40 Hottest Emerging Companies in the Advanced Bioeconomy’ list. This ranking is an important industry endorsement of DSM’s innovation and achievement in bio-based chemicals and materials. The recognition builds upon a successful year for Reverdia. In April, paints and coatings producer Mäder announced that it would use Biosuccinium® in its new range of bio-based alkyd paints. In October, Reverdia announced a collaboration with Dezhou Xinhuarun Technology (China) to jointly develop and promote Biosuccinium®-based microcellular polyurethane foams. These will be used in soles for footwear and in further applications. Besides this, a joint development program on bio-based polybutylene succinate compounds for injection molding was launched by Reverdia and Wageningen Food & Biobased Research. After meeting a technical milestone related to its low-pH yeast technology, Reverdia is now investing substantially in market and application development, and saw its number of customers double in 2016.

DSM Advanced Solar

DSM Advanced Solar aims to accelerate the uptake and effectiveness of solar energy by focusing on the development and commercialization of technologies and materials that increase the efficiency of solar modules, reducing the cost of energy delivered.

This business was renamed DSM Advanced Solar at the end of 2016 to better reflect its broadening portfolio of solar technologies and materials. It performed well in 2016, with top-line growth exceeding the average growth rate for the solar PV (photovoltaic) panel market.

New materials to power growth in solar

Solar panels (known as photovoltaic or PV modules) have become a mainstream source for power generation. In 2015, solar PV accounted for 25% of the new power capacity added globally, and continued strong market growth is expected as solar power becomes even more cost-competitive per kilowatt hour.

DSM is using its materials expertise to commercialize a portfolio of innovations that further lower the cost of solar energy by increasing the efficiency, durability and reliability of solar PV modules. Our solutions help harness more of the sun’s power, speeding the transition to clean, renewable sources of energy – and powering business growth at the same time.

DSM has built a strong position as a solution provider for high-performance solar PV materials, primarily driven by our market-leading anti-reflective (AR) coating, and we are expanding to offer additional materials and technologies. In 2016, we partnered with Suzhou Sunshine to be able to offer an innovative new type of backsheet. Polymeric backsheets surround the semi-conductor cells in PV modules and are key to enabling manufacturers to increase output (kWh) as well as extend durability and performance in the field. They protect PV modules against weather conditions and mechanical loads and provide safety through electrical insulation.

Suzhou Sunshine has succeeded in producing high-performance backsheets without using fluorine, an element that is known for being toxic to the environment and to people. Moreover, the backsheets are completely VOC-free – and can be recycled. They are co-extruded in a patented production process, greatly simplifying manufacturing and reducing costs by combining steps and avoiding the use of solvents, unlike conventional lamination.

The resulting backsheet has been evaluated on a wide range of performance parameters and tested and certified by CPVT, the leading Chinese testing Institute for solar PV modules and materials. DSM took its first orders for these products during the year.

Downstream sales efforts and intensified partnerships with leading PV glass manufacturers resulted in a significant growth in our share of the anti-reflective coatings market. De-bottlenecking of the manufacturing line in Sittard-Geleen (Netherlands) and transfer of the anti-reflective coating to a high solid grade ensured that production capacity met market demand, while reducing cost and carbon footprint, both for ourselves and for our customers. Our portfolio was expanded by the addition of an innovative backsheet sourced via an exclusive distribution agreement with Suzhou Sunshine New Materials Technology Co., Ltd. (China). Meanwhile, five solar material innovations were identified and earmarked for further development during the SunRISE TechBridge Challenge (reported on below under Innovation partnerships).

Our light-trapping textured surface technology showed considerable power output gain in outdoor tests during 2016 and generated significant customer interest. We will continue to further optimize technical performance before commercializing.

DSM Business Incubator

The DSM Business Incubator explores business opportunities in adjacent areas and future markets for DSM with a strong link to DSM’s technologies and competence base. Platforms are created within the scope of securing food, health and energy requirements of society, in close collaboration with industry partners and existing and potential customers. DSM’s Business Incubator has been instrumental in feeding the pipeline with opportunities that address customer needs.

In 2016, the DSM Business Incubator worked on a range of projects. In our energy storage project, we developed three product lines, which will be further refined in 2017. Our R&D partnership with Syngenta to develop microbial-based crop protection solutions has made an excellent start, with promising initial leads. Our Proteins for the Future project is generating interest among customers. We are building a pilot plant at our biotech site in Delft (Netherlands) so as to be able to provide prototype products at scale in 2017.

Innovation partnerships

DSM’s innovation partnerships provide direct and indirect business opportunities as well as helping the company build its corporate brand along with its individual product brands.

Our ongoing partnership with the Nuon Solar Team achieved a further success in 2016. The team, composed of engineering students from Delft Technical University, won the Sasol Solar Challenge on 1 October by driving 4,716.7 km across the South African desert in eight days in a vehicle powered only by the sun. A major contributory factor was the adaption of DSM’s groundbreaking light-trapping technology to create a new solar module fixed to the top of the winning Nuna8S car; the use of this innovative textured surface also improved the vehicle’s aerodynamics.

The SunRISE TechBridge Challenge proved a highly effective way of identifying promising start-ups and boosting open innovation in 2016. The initiative is a collaboration between DSM, Fraunhofer TechBridge, and Greentown Labs. Of 56 applications, five early-stage companies were announced as winners of the 2016 SunRISE TechBridge Challenge, designed to identify innovations in solar materials and technologies to reduce the cost of energy for photovoltaic systems.

In 2016, DSM and Novozymes joined the newly created DIVA Ventures as co-founders, together with members of the World Business Council for Sustainable Development and pro bono counsel Pillsbury Winthrop Shaw Pittman LLP. DIVA Ventures exists to co-develop and co-invest in early-stage impact ventures in partnership with the world's leading corporations.

Bright Minds Challenge

'Science can change the world', DSM's campaign to highlight science’s key role in tackling the challenges faced by societies around the globe, entered a new phase in 2016. We moved from profiling unsung heroes of science, and the often overlooked societal impact that their ideas can have, to helping new heroes put their solutions into practice with our inaugural Bright Minds Challenge.

The 2016 Challenge was initiated by DSM, together with Accenture, Greentown Labs, Skoll Center for Social Entrepreneurship, the University of Oxford, Solarcentury, SolarAid, Sungevity, CPVT and NREL. It is designed to fast-forward the transition toward 100% renewable energy by stimulating the development of innovative, scalable solutions for solar and energy storage. The consortium will provide the most promising emerging solutions with commercial, technical and mentoring support to facilitate scale-up as quickly as possible. Anyone who has a renewable energy solution that can significantly advance the potential for solar or energy storage can submit an entry.

The winners will be announced in June 2017.

Olga Bright Minds