We develop products and technologies that enrich people’s lives and are constantly on the lookout for groundbreaking developments and trends. Research and development (R&D) and innovation are the cornerstones of our success. In 2018, we spent around € 2.2 billion on R&D, corresponding to 15% of our net sales. New technology and the advance of digitalization in particular enable us to create innovative technologies, products, services and pioneering business models. At the same time, digitalization is decreasing the time-to-market for new ideas, which creates opportunities we intend to leverage.
Our approach to innovation and digitalization
Our three business sectors Healthcare, Life Science and Performance Materials, have established strategies to drive new product developments for the benefit of patients and our customers. The diversity of these business sectors provides us with a breadth of technologies and depth of market know-how, giving us a competitive advantage in developing new products.
When deciding where to invest, we analyze current megatrends to determine the innovation fields in which we see potential for new business. We endeavor to identify innovation projects that transcend our current portfolio and develop them from the initial idea all the way to a functioning business model. This can only succeed if our business sectors work closely together and if we are open to external momentum. Our end-to-end innovation process seeks to achieve exactly that.
Our Group function Strategy and Transformation facilitates innovation between the individual business sectors and beyond our current business scope. It oversees an end-to-end process that ranges from setting the innovation direction, through ideation, incubation and growth of projects to establishing long-term business models.
We push the progress of promising projects as quickly as possible from the brainstorming and idea generation stage to an incubation and growth phase, where we provide project teams with a suitable environment to develop their business models and scale-up. Projects are monitored in a lean, gate-based process, with strict criteria applied at each gate to evaluate progress. All activities are supported by experts in business model design, business development, market research and agile methodologies. The objective is that, after market launch, the new products or services will make a measurable contribution to our business success.
Driving digital innovations
A major focus of our innovation efforts is digitalization, and we want to leverage related opportunities to boost our business performance. We therefore increasingly form new strategic partnerships with organizations that offer different perspectives. The following areas are those in which we expect to see progress:
- Research and development: Digital technologies enable us to access and quickly analyze large volumes of data, thereby accelerating our research and development activities. This is especially the case in our Healthcare business sector, where we are working to advance the development of new drugs to provide patients with faster access to effective medicines.
- Supply chain management: Digital technologies help us to better manage our supply chain. Collating all data centrally gives us access to crucial real-time data. This enables us to predict supply bottlenecks around the world and respond promptly to make sure medicines reach their destination when needed.
- Production: We set up the infrastructure to capture data throughout all stages of our production processes and apply advanced data science methods to optimize our manufacturing methodologies.
- Digital product innovations: Digitalization enables us to broaden our existing product portfolio to include, for instance, new digital services. We also promote health awareness and improve disease awareness and patient treatment through innovative e-health offerings such as our Diabetes Online Risk Assessment (DORA).
- Interactions with customers: Thanks to modern data collection and analysis methods, we can make more efficient use of customer-relevant data. This information allows us to adapt our products and services where necessary.
You can find more information on research and development in our Annual Report 2018.
How we drive innovation
The organizational set-up of our research and development activities reflects the overall structure of our company. All three of our business sectors operate their own independent Research and Development (R&D) units, which are aligned with their individual innovation strategies. In 2018, our Group function Strategy and Transformation developed a new end-to-end process that covers innovation both between and beyond current business sectors and is responsible for implementation. This function reports directly to the CEO and Chairman of the Executive Board.
Our Innovation Committee (IC) oversees the implementation of innovation projects both between and beyond our business sectors. It is tasked with ensuring that the decision-making process for selecting innovation projects is both transparent and consistent and reviews the progress of ongoing efforts. The committee consists of senior executives from our Group functions and our three business sectors. For projects requiring larger-scale investments, the IC consults our Executive Board.
Our three innovation fields in the Innovation Center
Bio-Sensing and Interfaces
This innovation field focuses on the interface between the biological and digital world. The goal is to utilize data analytical tools to enable faster and more accurate (remote) monitoring and treatment of health in numerous areas.
This field concentrates on the biotechnology required to produce meat in laboratories so that it is healthier, more efficiently produced, ethical, and environmentally sustainable.
Liquid Biopsy technologies
This area focuses on non-invasive alternatives to traditional tissue-based diagnostics like liquid biopsy, thereby reshaping methods of detecting and managing various diseases.
Whilst we are open to innovation around the world, many potential partners for these projects are based in Silicon Valley (California, USA), which is one of the key sites in the global high-tech industry. We are therefore currently building an innovation hub in Silicon Valley to be closer to innovation partners there, be it companies or institutions. The Silicon Valley Innovation Hub aims to scout new technological opportunities and establish partnerships and projects within our three innovation fields.
Discovering new technologies through collaboration
In 2018, our Silicon Valley Innovation Hub signed a partnership agreement with, among others, the Bao Group at Stanford University. Using our liquid crystals as the enabling technology, Bao is working on Liquid Crystal Elastomers, often referred to as artificial muscle, making it the most promising candidate for developing wearable haptic sensor-actuator systems.
Our China Strategy and Transformation Group is responsible for driving our strategy in this fast-evolving market. The China Innovation Hub was set up in 2018, with the mission to boost innovation through collaboration between current businesses, and cooperate with Chinese start-ups, academic institutions, business partners and local governments to explore new innovation fields. In spring 2019, the first batch of start-ups will be hosted by the China Innovation Hub.
M Ventures is our strategic, corporate venture capital arm. It invests in innovative technologies and products with the potential to significantly impact our core business areas. M Ventures has a significant focus on early stage investing and company creation, including the creation of spin-offs to leverage our science and technology base, and takes an active role in its portfolio companies. The fund has a total volume of € 300 million and has the mandate to invest in the areas of Healthcare, Life Sciences, Performance Materials and New Businesses.
Our commitment: Protecting innovative ideas
We are committed to ensuring the confidentiality of sensitive information, especially of intellectual property in digitalization projects, and to protecting our innovative ideas. Our Policy for Data Protection and Personal Data Privacy defines the standards that govern how we process, save, use, and transfer data. You can find more information on data protection under Compliance.
Spotlight on the Innovation Center
We completed the construction of our new Innovation Center in Darmstadt (Germany) and moved into the premises in early 2018. It was officially inaugurated during our 350th anniversary celebrations on May 3, 2018 which were attended by German Chancellor Angela Merkel.
The Innovation Center offers our people and external partners an optimal environment in which to cultivate their ideas and scale them up to viable new business. We provide the infrastructure needed to advance cutting-edge projects, along with state-of-the-art methods and tools. It currently hosts 22 innovation projects. In September 2018, the Innovation Center was nominated for the National German Sustainability Award.
Our bi-monthly Innovators’ Club brings together a diverse range of external and internal experts to share insight and debate about a range of topics, from curiosity research and new work order to novel innovation methodologies. These events are open to anyone with an interest in innovation, from start-ups to company experts and other interested employees, and even other organizations.
Synergizing external ideas: Start-ups and cross-industry collaboration
Numerous start-ups around the world are working on new technologies and innovative business models. Our Accelerator program supports selected enterprises in their development, with a focus on initiatives that align with our business sectors and other current trends. In return, we gain insights into the innovative start-up scene and are able to identify emerging market trends early on. Our primary goal is to link these start-up companies with our innovation projects or our business sectors for future collaboration. In 2018, we accepted ten start-ups into the Accelerator at our Darmstadt headquarters. Following the end of this three-month program, we are already working on an innovation project with one of the start-ups and are in talks with eight others regarding future collaboration.
In 2018, we started our Africa Satellites program in Nairobi (Kenya), Lagos (Nigeria) and Cape Town (South Africa). These satellite engagements will enable us to foster our network in the African founders’ scene and to scout cutting-edge start-ups for our Accelerator program. As part of the program we organized a hackathon in Cape Town (South Africa). Also in 2018, we started to accept applications to our China accelerator program, which will be run by the China Innovation Hub from 2019 onwards.
Our Accelerator is complemented by hackathons, two of which were carried out at the Innovation Center in 2018. One of them was a so-called Makerthon in collaboration with Deutsche Telekom. Over three weeks in late 2018, almost 80 young students and professionals provided hardware solutions to different challenges where healthcare and technology intersect. At a final pitch event at our Innovation Center, the teams were offered the opportunity to present their solutions to the two host companies.
We support the start-up program HIGHEST 1877, which is run by the Technical University (TU) of Darmstadt (Germany). We were Silver Sponsors of the Startup and Innovation Day held in October 2018 and also participated as jury members.
In 2018, we continued our two-year partnership with the European Space Agency (ESA) through which we hope to leverage synergies in areas such as innovation, digitalization and materials research. We hosted astronaut Thomas Reiter, who gave a speech to our R&D employees about research options in space, and we took part in the panel discussion “Space Meets Non-Space” at the ILA Berlin, a leading aviation industry exhibition. We were also a partner of the “Space Exploration Masters”, initiated by the European Space Agency (ESA), which annually awards the best business ideas that bring the benefits of space exploration closer to society by way of products and services.
Channeling internal ideas to generate innovation projects
We want to maximize the innovative power within our company, which is why we give our employees around the world the opportunity to present their ideas to us via various channels. Our objective is to identify ideas between our business sectors and beyond our current scope that have the potential to become viable new businesses. Our Innospire (innovation and inspiration) initiative encourages employees to submit ideas for new products, services and business models. The best suggestions are then developed into business plans in a multi-stage process. More information on this topic can be found under Employee engagement.
The most promising ideas that are sourced through channels such as Innospire become innovation projects, and we offer employees the chance to focus on their innovation project by hosting them in the Innovation Center. In addition to financial backing we provide a protected ecosystem and dedicated support, as well as clear governance and decision-making to efficiently grow and scale innovation projects into sustainable future businesses.
Our Innovator Academy strives to unleash the innovation potential of idea-givers, internal project teams, members of Think Tanks and start-ups. It offers a wide range of development programs, methodologies and online and offline trainings. Besides an online training platform, webinars are offered introducing employees to the topics and contents of the Innovation Center through practical examples.
Third Displaying Futures Award
The aim of our annual Displaying Futures Award, run by our Performance Materials business sector, is to support teams from academic and institutional backgrounds. In 2018, the target topic area was “smart medical devices”. Submitted by creative minds and start-ups from 19 countries, the number of ideas we received rose from 69 in 2017, to 97 in 2018. A panel of judges selected the three winning teams by considering important criteria such as innovativeness, business potential and social impact. The winners enter into a year-long partnership with our company, which will culminate in a final event in summer 2019 where they will be able to pitch their ideas to investors.
Maximizing the opportunities of digitalization
Through our strategic partnership with Palantir Technologies, a company based in California (United States), we are able to use their data analysis capabilities to improve and accelerate the development, commercialization and delivery of new medicines. The access to Palantir technology has enabled us to create tools that help to improve patient retention, increase sales rep efficiency and aid in strategic targeting to deliver effectively on our product launches. We can also now integrate and analyze large amounts of data to improve our operational excellence.
Syntropy is a joint venture being formed by Merck KGaA, Darmstadt, Germany and the California software company Palantir Technologies. The partnership aims to give scientists and research centers access to a technology platform that integrates different types of datasets across an organization into a singular point of access. In this way, experts can collaborate more effectively on research on cancer and many other diseases.
Advances in medical research over decades have created a wealth of knowledge about diseases and how to treat them. This includes biomedical data. Massive amounts of this data are trapped within silos and between institutions and are inaccessible to the scientists and clinicians who need it to advance their research. Syntropy will create a network that drives discovery and improve human lives.
Improving customer experience through artificial intelligence
We are currently developing chatbots, which are text-based dialogue systems that enable people to ask computer systems questions in natural language – exactly as they would write messages to another person. This means we are available to answer questions from our customers 24 hours a day. In the future, for example, patients with multiple sclerosis will be able to order refills for their RebiSmart® injection device via chatbot. Future chatbots may even be capable of reminding patients to order a refill. Chatbots are more cost-effective for us than traditional customer services.
Development of a Global Data Science Team
In 2018, we built up a global data science team of around 30 data scientists to leverage the huge potential in advanced analytics and machine learning. The team works with eCommerce data to provide insights to our customers and business teams in Life Science, using image recognition techniques to support the work of clinicians and researchers in our Healthcare sector, and assisting in the research and innovation process in Performance Materials. In addition, we have established a global data science community, bringing together over 250 analytics professionals from around our company. One milestone of this development was when around 120 employees participated in our first internal Data Science conference in June 2018.
Promoting visionary research
During our 350th anniversary year we were the main sponsor of the Curious2018 - Future Insight Conference. The conference, which took place in July in Darmstadt (Germany), brought together top scientists from around the world to discuss the future of science and technology. More than 60 renowned speakers, including six Nobel laureates, presented their work to around 1,300 invited guests. We intend to establish Curious Future Insight as a flagship conference, a forum at which the brightest minds in science and entrepreneurship can share their work and develop visionary solutions to tackle global challenges. The conference will take place again in July 2020.
During the conference we also launched the Future Insight Prize to stimulate innovative solutions enabled by ground-breaking science. We want to help drive the development of what we call dream products. These are products that don’t yet exist but that might solve some of the existential challenges to mankind. We plan to grant up to € 1 million every year for the next 35 years to researchers who contribute to making these dream products a reality. The first Future Insight Prize will be awarded in 2019, for achievements in the field of pandemic preparedness.
In 2018, we also held the Innovation Cup Anniversary Edition, which brought together some of the brightest students from all over the world with experienced professionals to develop new ideas into convincing business plans. A jury made up of top scientists and entrepreneurs selected the best business plan and awarded € 20,000 to the winning team. In addition, in 2018, we started a series of science competitions and rolled out the 350th anniversary research grants.
Rewarding inclusive innovation
In September 2018, we hosted the European final of the “Inclusive Innovation Challenge” in Darmstadt (Germany) as the exclusive European partner. The competition was initiated by the Massachusetts Institute of Technology (MIT) Initiative on the Digital Economy and aims to accelerate technology-driven solutions enabling greater economic opportunity for employees around the world. The challenge awards over US$ 1 million in prize money. Organizations and companies from around the world can take part with technological solutions to shape the future of work.