INNOVATION PROCESSES Example of Stamypor

Let’s review the what, why and how… Innovation process

FROM IDEAS TO PROJECTS I have a great idea!

FROM ORE TO DIAMONDS

Best practice (Theory) DSM NBD (Design) Stamypor (Practice)

Stage Gate System √ X √ X √ X √ X What will it look like? Who will care? Winner? Loser? √ X What will it cost? Who will pay? How will we build it? Where? √ X Here is a prototype Do they like it? √ X We made X They bought Y √ X

Things to consider: Accountability: what is the cost of doing, not doing, doing wrong? Tracking: how many in, how long there, how many out, how many successful? Where did the ideas come from: congregated in R&D or spread throughout? What kinds of innovation: all along the keyboard or just one key? What prompted them: competition, new employees, partnerships, customers? Who benefits: existing customers, new customers, internal people? What did we learn? Are we getting better?

Contextual Innovation The way you structure innovating activities depends on industry, organization, competitive environment, business model, organization culture, resources available, sense of urgency, etc.

Stamypor Case Questions Type of innovation? Why separate NBD unit? Nieland’s recommendation to NBD board? Usefulness of stage-gate process? Lessons learned?

Type? Do something new Exploration Change basis of competition Stamypor: Radical innovation Long-term development Improve what exists Exploitation Safe, cheap, less risk, low impact, quick returns

BG’s versus NBD unit BG NBD Short-term profit targets Small, autonomous, flexible Incremental innovations Radical innovations Longer time horizon Balance risk with promise

PRODUCT PORTFOLIO

BALANCING RISK AND INVESTMENT Accumulated investments progressively increase Failure risk progressively decreases due to stage gate process TIME

What are the risks? Potential application area is new to DSM Technological challenges in development of product and production technologies While lead customers are not new, markets and applications are new Relationships with lead customers based on trust

What is the commercial value? Value generated when porosity is translated into advantage for customers Value creation depends on customer application – DSM’s customers’ customers Price depends on value to customer Sales volume depends on value added over time Product cost/quality depends on volume and process technology Different customer groups mean different value considerations and competitor responses

Application of stage gate process New Business Creation – investigating 35 new ideas/year for feasibility; 2-3 proceed to 2nd phase. Stamypor? Business Evaluation Project – project manager & team develop against criteria. Start-up Company – if satisfy criteria become small start-up companies.

ASSESSMENT AGAINST CRITERIA Non-Financial Criteria Financial Criteria Not within charter of BGs √ Annual average market growth > 10% Dependent on customer Fit with company culture, strategy and competencies Potential turnover 3 – 5 years: €1-3 million 2000: 82 tons/yr X €5/kg < €500,000 Synergy in raw material/technology/market Potential turnover > 5 years: > €10 million 2006: 910 tons/yr X €2.25/kg = €2 mill (if 5/kg = 2.5 mill) Fit with NBD Portfolio Gross margin: > 50% Not if using batch production Low-risk scenario possible (no high up front costs) IRR (10 yrs): > 20% < 20% What should Rein Nieland recommend?

Lessons Stage gate process Team composition Technical problems Market problems Financial issues