In this double feature we gain an insight on two key roles helping to drive innovation and continue the transformation and business success of DSM Ventures and Licensing*. Andrew Gaule, founder of the Corven Corporate Venturing Network, questions first Rob van Leen, chief innovation officer, and Marcel Lubben, managing director, second.
VAN LEEN:
Gaule: Give a brief description of DSM and the transformation of the business from Dutch State Mines to a global biomaterials business.
Van Leen: As a company that historically started out as a coal mining busi-ness, we have transformed ourselves in several steps, growing through a commodity chemicals and plastics company and then further changing in an innovation-driven speciality company, with focus on state of the art businesses in life sciences and materials sciences.
This change is one in a direction of more scientific sophistication, more knowledge intensive and, therefore, more value added. Also the sustainability of our operations has become a central factor and is now a key requirement for all our innovations. One of the strategic areas we are currently heavily focusing on is the creation of a new bio-based economy, which, looking at our history, is indeed a beautiful closing of the circle – originating from the core of the black energy industry, we are now one of the leaders in creating a sustainable green society.
Gaule: Give us a description of your chief innovation officer (CIO) role and its importance in determining the strategy and change of the business.
Van Leen: As CIO I am responsible for boosting the innovation in our company. I do this on two separate fronts. First we accelerate the innovation process company-wide, by increasing the skills of all people involved.
We have created an innovation community network in which best practices are actively shared and people are encouraged to reach out to each other for support.
In addition to this I am also leading the renewal of the company by setting up new business ventures that do not fall within the core strategic areas of the current business groups, yet are new for the company.
Gaule: What are the key departments for which you are responsible?
Van Leen: As CIO, I am also managing the DSM Innovation Centre, which has been established to support and enable innovation within DSM. The centre has both a corporate new business development role, as well as a leading role in the company-wide acceleration of innovation.
The new business development role is handled in our incubator department and the emerging business areas. The incubator screens novel opportunities in their business creation process and turns the most promising opportunities in growth platforms.
Very successful incubator projects that have the potential to grow into a significant new business entity within DSM are subsequently turned into emerging business areas.
These you can view as start-up companies – with the agility that is common for young companies – within the larger company, with its many corporate support benefits.
We believe this concept of emerging business areas merges the best of both worlds – between start-ups and large corporations. Our innovation programme officeis key in the acceleration of innovation throughout the company.
This team works with the major innovation project teams across all business groups and works towards establishing a common innovation language within the entire company.
They exchange best practices and create both formal as well as informal networks between the various business entities. Next to the innovation programme office,we have a corporate venture capital group that invests in fitting start-up companies, as well as a licensing group that supports the businesses in negotiating more valuable licensing deals.
Also we host our chief technology officer (CTO) with his group, which manages the widespread competence areas in our company. The CTO office is instrumental in creating a well structured science network, aiming to link not only our internal research and development (R&D) organisations but also share the many links we have to the outside science community.
Gaule: Many businesses have efficientventuring or new business units but they are not necessarily effective in driving change in the main business. How do you ensure that is effective in DSM?
Van Leen: The key here is a solid alignment with the businesses and the corporate strategy – this is valid both for our venture capital group as well as the new business development ventures we create.
In our early years of venturing, we – like many others – used the venturing tool also as a "window to the world". This helped us greatly in learning about new areas, yet as you indicate in your question it sometimes puts pressure on effectiveness.
Currently we focus entirely on investments where there is a direct alignment with our business strategy. This is ensured by asking internal business executives to express their support for the investment.
In addition we now invest only if there is also some kind of collaboration set up between DSM and the start-up company. This is a classic joint development but includes joint commercialisation, a licensing agreement between the two parties and so on.
With respect to our in-house new business development ventures, it is very important we are able to continue to support them long enough for them to reach a critical size.
The selection of the areas is made within the scope of our corporate strategy and we ensure the continued support and commitment of our managing board.
Recently the DSM strategy has been updated and our board has confirmed the continued focus on these areas.
Gaule: What is your view on current market conditions for making the case for innovation in these stringent times?
Van Leen: Innovation is always an essential theme for a company, and in hard times even more so. Though the market might not be great for some new products at this moment, once the market picks up, the winners will prove to be those companies that have not wasted time but have continued their developments and are ready to go as new market opportunities arise.
At DSM we call this strategy of maintaining our focus "staying the course", which beautifully explains this case. As a sail boat in stormy winds might sometimes weather a heavy beating, it will reach the intended destination only if it keeps in mind its general course.
Throughout the last crisis we have seen the success of this. Despite the difficult environment we have reached – even surpassed – all our innovation sales targets.
We were able to do this just because of our staying-the-course strategy – customers that wanted to distinguish them-selves with new offerings could do so, because we had kept all our development programmes running. Obviously the current economic climate does not make things easier, but why does it have to be easy? Creativity often flourishs under pressure as it forces people to think about alternative approaches.
MARCEL LUBBEN:
Gaule: Give a brief description of DSM ventures and your purpose.
Lubben: DSM Venturing was established 10 years ago. Its purpose is to provide a window to the world for the DSM businesses and create strategic options such as access to new technologies, markets and business models. Financial return is important but comes after strategic return.
Gaule: How do you see the changes in the current venture capital and venture market and how would corporate venturers have to change their propositions for this new market?
Lubben: Venture capital firms (VCs) have difficulties in raising new VC funds in today’s financialmarkets as affected by the global debt crisis. The fact that many VCs failed to provide satisfactory financial returns over recent years and that the average time a VC investor stays in a start-up is now more than nine years did not help.
Investors are moving to later-stage opportunities. I expect we will see more situations where corporate venturers will need to syndicate in an individual investment case.
Valuations of start-ups might come down with start-ups having to become quickly self-sustaining and generate cashflo. I also see that mergers and acquisitions at an earlier stage might be required in the current market.
Gaule: How do you see the role of corporate venturing changing in DSM?
Lubben: DSM has been focusing on solid alignment of our venturing activities with the innovation goals of the business and we will continue to do that. We will probably be looking for a healthier balance between co-commercialisation and co-development when working with start-ups.
In the recent past we have seen quite a focus on co-development. We will move into high-growth economies such as China, India and Brazil, acknowledging that opportunities will be more later-stage in those regions.
Talking about that, we will pay more attention to a healthy balance between early and late-stage investments.
Gaule: What has been your most interesting recent deal?
Lubben: It is not the most recent but it comes close to an ideal case. Fruitflow was discovered by Prof Asim Duttaroy at the Rowett Institute in Aberdeen in 1999. The Fruitflow ingredient was isolated from ripe tomatoes and studies demonstrated it could work against platelet aggregation (a cardiovascular indication).
In April 2008 DSM Venturing made an investment in Provexis and DSM obtained a board seat there. At the same time licensing discussions started between Provexis and DSM Nutritional Products. This resulted in a co-commercialisation agreement where DSM Nutritional Products’ sales team would promote Fruitflow through a profitsharing arrangement with Provexis.
This created a true win-win. Provexis was able to scale up the commercial introduction through an enlarged salesforce, DSM could benefit from selling a new product and broaden its human nutrition offering, and the value of the investment of DSM Venturing increased.
Recently the collaboration expanded again though a joint development agreement. It goes the other way this time. Provexis will take one of DSM’s products, stabilising blood-glucose levels, and develop this towards commercialisation.
Gaule: What do you do to relax?
Lubben: I am married with a 10 year-old daughter. The three of us love to take trips over the world. The past two years we have been to Costa Rica, Malaysia and various spots in the US. New York is our favourite city. I am a fanatic runner in my spare time. It gives me time to reflectand recharge. I love to watch my daughter play hockey.
* A case study on DSM is featured in the book Open Innovation in Action – How to be strategic in the search for new sources of value, illustrating the strategic transformation, linking of innovation approaches and the purpose, processes, people, partners and performance measures to drive the change as shown in the illustration below.