Kumpf

Hier steht die HeadlineSystematic Innovation: Driving Profitable Growth at Bayer MaterialScience

Dr. Robert Kumpf

Vice President, Future Business Americas

Presentation to Commercial Development and Marketing Association, April 2006

Forward Looking Statements

This presentation contains forward-looking statements based on current assumptions and forecasts made by Bayer Group management.

Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in our public reports filed with the Frankfurt Stock Exchange and with the U.S. Securities and Exchange Commission (including our Form 20-F). The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

The Core Businesses of the Bayer Group

2005 Global sales = > $ 30Billion

Sales Breakdown by Subgroup BMS has highest sales share within Bayer

9,429 Mio. €

5,896 Mio. €

10,695 Mio. €

Net Sales in million EUR

Health Care36%

CropScience23%

BayerMaterialScience

41%

BMS 2005 Global sales = > $ 10

Billion

BMS Products

Polycarbonates

RoofConstruction

RoofConstruction

Optical DataStorage

Optical DataStorage

InsulationInsulation

CoatingsCoatings

CelluloseDerivativesCellulose

Derivatives

MultimediaEntertainment


AdhesivesAdhesivesSport andLeisure

Sport andLeisure

ElectronicIndustry

ElectronicIndustry

ComfortComfort

BMS Products

Polyurethanes

RoofConstruction

RoofConstruction

Optical DataStorage

Optical DataStorage


CoatingsCoatings


Derivatives




Sport andLeisure

ElectronicIndustry

ElectronicIndustry

ComfortComfort

BMS Products

Coatings, Adhesives and Sealants

RoofConstruction

RoofConstruction

Optical DataStorage

Optical DataStorage


CoatingsCoatings


Derivatives




Sport andLeisure

ElectronicIndustry

ElectronicIndustry

ComfortComfort

BMS Products

Thermoplastice Polyurethanes

RoofConstruction

RoofConstruction

Optical DataStorage

Optical DataStorage


CoatingsCoatings


Derivatives




Sport andLeisure

ElectronicIndustry

ElectronicIndustry

ComfortComfort

BMS Products

H.C. Starck

RoofConstruction

RoofConstruction

Optical DataStorage

Optical DataStorage


CoatingsCoatings


Derivatives




Sport andLeisure

ElectronicIndustry

ElectronicIndustry

ComfortComfort

Generating Growth at Bayer MaterialScience –Focus on Managements Role

Outline of Presentation:

What do we mean by Innovation?

Is there a business case for Innovation?

Management commitment to Innovation?

How we at BMS organizing and investing to achieve this growth?

Which Innovation Tools have we found to be effective?

Examples of trends and growth opportunities and a “case” study in open innovation at Bayer Material Science?

Growth at Bayer MaterialScience

*innovation = implementing new ideas to create value.

Growth from *innovation is a business imperative.

*Innovation can come from anywhere

Business Case for Innovation - Qualitative

A consensus has emerged that innovation in all its forms is the only true sustainable comparative advantage, be it for regions, countries, states, or private

sector companies

Innovation “moves the needle”Is there a price premium for “innovation” in a stock price?

YES!

Source: Business Week , April 2006

Business Case for Innovation - Quantitative

-10%

-5%

0%

5%

10%

15%

20%

0% 10% 20% 30% 40% 50% 60%

GR

OW

TH (%

Cha

nge

in R

even

ues)

Sustained above GDP growth was only achieved if 30% -40% of sales resulted from new *innovations

% of revenues from innovations (last 5 years)

Source; ACC 2002, Study of 50 chemical companies

Organizing for Sustained Growth

Everyone wants sustained long term growth but daily business interferes. Preventing this from occurring requires:

•CEO and Board level-commitment•A “central” * growth-focused organization with influence and resources

•A world-class process and metrics for measuring success•Passion for innovation and a tolerance for risk

*not necessarily a central R&D group

Our Vision To turn our inherent strength into efficiency, innovation and profitable growth to cope with future challenges

Leading Market Leading Market PositionsPositions

ProductProduct & & ProcessProcess knowknow--howhow

Global presence & diversityGlobal presence & diversity

StrengthsStrengths

Effic

ienc

yEf

ficie

ncy

Inno

vatio

nIn

nova

tion

GrowthGrowth

Our Vision

„To be the best and mostrespected materials company in the world; supplier and employer

of choice“

• Application development

• New business development outside existing portfolio

• Process development• Technical product

management

• Product development via materials research

New

m

ater

ials

PRO

DU

CT

APPLICATION

known emerging future

New applications for existing

products

New products

for existing applications

Prod

uct

mod

ifica

tion

CoreCompetencies

Bayer

Emerging new markets

with new products

know

n

Future Business OpportunitiesKey Growth Drivers

Future Business Organization

New Technologies Creative Center

» University Interactions» New materials and

technmologies

“Technology Push” » Market &

application trend scouting » New business and

application opportunities

“Market Pull”

“Automotive E/E in 2015”“Automotive E/E in 2015”

“Implement Growth” and Customer Projects

Industry Innovation

» Implements profitable project ideas into new markets » Focuses on application ready to market

A Modern “Tool Chest” for Innovation

Global Idea - ManagementSystems “Open Innovation Model”

To have a good idea,you need to have a lot of ideas

- Thomas Edison

Ideation sessions with Customers and Industrial

Designers

Future Planning Tools

Global, 24/7, Web-based Idea Management

•In the global economy ideas must be harvested 24/7

•Bayer MaterialScience has established a Web-based idea management tool –North America, South America, Europe, Asia.

•Event-based approach to Idea Management

•Our database now contains > 2000 ideas.

Ideation Events: Management, Customers and Non-traditional Stakeholders

Scientists and engineer now find themselves “ideating” with customers,

artists, designers, and…… senior management

Future Business-NALT Innovation Summit on Sustainability

Trend Analysis and Future Planning Tools

Bayer Open Innovation Model

Old “Closed” Model of Innovation:

•Invent and develop internally – sell what you invent

•“Silo” organizations

•Only national and sector competition

New “Open” Model of Innovation:

•Starts with questions:

? Where do we want to go, with what new technologies; and with whom ?

•Core strategy and integrated organizations

•International and “extra-sector” competition

Bayer Open Innovation Model

Technology AlliancesUniversities (Globally)

Venture Capital Funds

Investment in Start-ups

Results from BMS Innovation ToolsAn implemented innovation process

Review Priorisation

Feasibility

Flag-ships

Society demandSociety demand

Technology pushPolymer technology trend scouting

New materials and process opportunities

Technology pushPolymer technology trend scouting

New materials and process opportunities

Market pullMarket & application trend scouting

New business and application opportunities

Market pullMarket & application trend scouting

New business and application opportunities

Sensitive Materials

SustainableChemistry

Nano-Technology

Medical Materials

Business Units

IdeaWorks

Project ManagementProject Management

New Data

StorageOptics& Light

Energy Management

InterfaceMan /

Machine

Greenhouse

ElectronicsEnablingTechnol.

Security &

Defense

Senior management ia BMS is involved already in the “fuzzy front end”

Mass Customization and Lux for the Masses: the “my.xyz. com” Generation

AURA® Color Infusion TechnologyTrend Marketing and Mass Customization

► AURA color infusion technology colors already molded, extruded or thermoformed parts made from clear, translucent or opaque resins

► AURA technology is now being licensed by innovative companies in the United States and we are actively pursuing potential licensees

► Recent licensees: Replex Plastics, 3form and Apollo Color Coatings

New Dimensions in Data StorageMaterialScience is Actively Involved

0

100

200

300

400

500

600

1980 1985 1990 1995 2000 2005 2010 2015 2020

Holography Multilayer

New technologies 200 – 1.600 GB

Cap

acity

(GB

)

CD0,7 GB

DVD4,7 GB

Blu-ray 25 GB

HD DVD20 GB

Near Field Recording > 100 GB

Today

Signalbeam

Referencebeam

Disc Active recordingvolume

α

Spatial lightmodulator

Holographic Data StorageDigital Hologram

► Page wise recording► Angle Multiplexing

Volume Storage

The Future of Holographic TechnologiesPotential Beyond ODS

►Document security►3-D imaging media

►New display technologies

German passport with holographic shadow pictures (HSPTM)made of a photopolymer

Market growth through increased performance

New types of holographic imagesfor advanced banknote and brandsecurity

Market growth through new applications

- Holographic mirror for next generation projection displays, e.g. automotive "heads-up"

- Full-color 3-D display and image

Source: Bundesdruckerei Source: ECB

►Anti-counterfeiting

Source: Siemens VDO

HoloProTM

2006-2007 2010e ≥ 2015e

Future Trends in the Electronics IndustryFunctional Polymers Entering the Scene

Today Future

Polymer Electro

nics

Lighting

Simple RFID tags

Large-scale Displays

Flexible Displays

Barrier films

Integrated Sensors(e.g. MEMS)

Incr

easi

ng fu

nctio

nalit

ies

Multi-functionality as a key factor in polymer electronics

Advantages of polymer electronics

► Mass product

► Flexible material

► Cheap, disposable

► Good processability

► Addition of new functionalities (e.g. electroconductivity, luminescence) opens up new opportunities for use of polymers in the electronics industry

► Polymer electronics adds to today´s silicon-based technologies

zaZen: Concept Car from Bayer and Rinspeed

► Debuting at the Geneva International Motor Show – March 2006

► Holographic back light

► Smoothly contoured single-section roof dome made of polycarbonate Makrolon®

► technoGel pads used on the seats

► Car seats based on Makrolon sheet

► Coating based on raw materials with special effects

Future Business - Greenhouse Initiative

“Greenhouse” is parts of our Future Business initiatives , providing a platform for projects outside the primary scope of current business units

Future Business organization identifies attractive projects and supports business case

Greenhouse is the business development phase with milestone-controlled funding for a predefined period

After Greenhouse phase, business is integrated into BMS business or follows exit models

A Greenhouse project –Carbon Nanotubes (Baytubes)

Cost-efficient manufacturing of ultrapure carbon nanotubes

Product development using carbon nanotubes: hybrids with outstanding mechanical, electrical and physico-chemical properties at significantly lower loadings than conventional fillers

Core Business or Exit

GreenhouseBusiness Development

New BusinessOpportunities

Baytubes®: multi-walled carbon nanotubes

Main Restraints for broad commercialization►Price and large scale availability►Quality and Reproducibility

The Goal: Low cost / high quality production

20 nm

BTS

Baytubes™25 nm

Process development for large scaleproduction and polymer processing

Electrical conductivity

Thermal conductivity

Tensile strength

Further informationwww.baytubes.com

Greenhouse Initiative to Start-up Company

Organizing for Sustained Based Growth

Everyone wants sustained long term growth but daily business interferes. Preventing this from occurring requires:

•CEO and Board level-commitment•A “central” * growth-focused organization with influence and resources•A world-class innovation process and metrics for measuring success

•Passion for innovation and a tolerance for risk

Questions?

Kumpf

Business

Transcript of Kumpf